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hi can someone please explain how to solve this

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hi can someone please explain how to solve this

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Answer #1

Beta is the measure of sensitivity/change/movement of an asset due to change in market portfolio. Under CAPM, Beta represent systematic risk of a stock. Systematic risk is non-diversifiable risk.

Beta of a market portfolio is always equal to one(1) because coefficient of covariance of market portfolio and market is always one(1).

Beta of a risk-free assets is Zero as risk free assets are not related to market.

Beta of Portfolio is weighted average of individual stock’s beta in the portfolio.

Betaof portfolio(%)-X , * W

Computation of Beta of portfolio given in above question -

Beta(eta) Weight(W) eta * W
Market Portfolio 1 0.74 0.74
Risk free asset 0 0.26 0
Beta of Portfolio (eta_{p}) 0.74
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