Using the CAPM formula to calculate required return we can calculate Beta of portfolio | ||||||
Ke | Rf + Beta*(Rm-Rf) | |||||
Ke represents return of portfolio | ||||||
Rf represents risk free rate of return | ||||||
Rm represents market return | ||||||
Calculation of Beta of portfolio is shown below | ||||||
0.1375 | 0.06 + Beta*(0.11-0.06) | |||||
0.1375 | 0.06 + Beta*0.05 | |||||
0.1375-0.06 | 0.05Beta | |||||
0.0775 | 0.05Beta | |||||
Beta | 0.0775/0.05 | |||||
Beta | 1.55 | |||||
Thus, Beta of portfolio is 1.55 | ||||||
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1
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