Question

You have a portfolio that is invested 21 percent in Stock R, 36 percent in Stock S, and the remainder in Stock T. The beta of Stock R is .74, and the beta of Stock S is 1.29. The beta of your portfolio is 1.17. What is the beta of the Stock T? Multiple Choice Ο Ο Ο Ο Ο

this is my last question I have for this month and I really need these answered! thank you!!!

Answer 1

1)

Weight of stock T = 100% - 21% - 36% = 43%

Let bets of stock T be X

1.17 = 0.21*0.74 + 0.36*1.29 + 0.43*X

1.17 = 0.1554 + 0.4644 + 0.43*X

0.5502 = 0.43*X

X = 1.28

Bets of stock T is 1.28

2)

Let investment in stock K be X

Investment in stock L be 14,000 - X

0.0985 = (X / 14,000)*0.083 + [(14,000 - X) / 14,000]*0.119

0.0985 = x0.083 / 14,000 + [(1,666 - 0.119X) / 14,000]

1,379 = X0.083 + 1,666 - 0.119X

287 = 0.036X

X = $7,972.22

Investment in stock K is $7,972.22