Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds. If the σ of your portfolio was 0.25 and σ_M was 0.21, the β of the portfolio would be approximately ________. A) 0.64 B) 1.19 C) 1.25 D) 1.56

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Quizplus · Accepted Answer

The beta (β) of the portfolio can be calculated using the formula: β = σP / σM, where σP is the standard deviation of the portfolio and σM is the standard deviation of the market. Given σP = 0.25 and σM = 0.21, β = 0.25 / 0.21 ≈ 1.19.

Suppose You Held a Well-Diversified Portfolio with a Very Large