What is Nico's portfolio beta if he invests an equal amount in Asset X with a beta of 0.60, Asset Y with a beta of 1.60, and the risk-free asset?
A) 1.24
B) 1.00
C) 0.73
D) 0.66

Question

Quizplus · Accepted Answer

To calculate Nico's portfolio beta, we need to use the following formula:

Portfolio Beta = Weight of Asset X * Beta of Asset X + Weight of Asset Y * Beta of Asset Y

Since Nico is investing an equal amount in Asset X and Asset Y, the weight of each asset is 0.5. Also, the beta of the risk-free asset is 0. Therefore:

Portfolio Beta = 0.5 * 0.6 + 0.5 * 1.6 + 0 * 0 
Portfolio Beta = 0.8

Therefore, Nico's portfolio beta is 0.8.

What Is Nico's Portfolio Beta If He Invests an Equal