You own a portfolio equally invested in a risk-free asset and two stocks. If one of...

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You own a portfolio equally invested in a risk-free asset and two stocks. If one of...

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.61 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? Answer to two decimals. Thank you !!

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Answer 1

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Answer #1

Weight of each=(1/3)

Portfolio beta=Respective beta*Respective weight

1=(1/3*1.61)+(1/3*Beta of other stock)+(1/3*0)[Beta of market=1;Beta of risk-free assets=0]

1=0.5367+(1/3*Beta of other stock)

Beta of other stock=(1-0.5367)*3

=1.39

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Answer 2

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