Homework Answers
Beta = Standard Deviation of Portfolio / Standard Deviation of Market Return
a.
0.9 = Standard Deviation of Portfolio / 0.16
Standard Deviation of Portfolio = 0.9 * 0.16
= 0.144 or 14.4%
b.
0 = Standard Deviation of Portfolio / 0.16
Standard Deviation of Portfolio = 0 * 0.16
= 0%
c.
Beta = 0.11 / 0.16
Beta = 0.69
d.
Poorly Diversified Portfolio is riskier
Beta = 0.16 / 0.16
Beta = 1
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