Asked by brandon
You would like to create a portfolio that is equally invested in a risk-free asset and two stocks. The one stock has a beta of .80. What does the beta of the second stock have to be if you want the portfolio risk to equal that of the overall market?
Answers
Answered by
Ms. Sue
A risk-free asset has a beta of 0. The average market beta is 1.0
0.8 + x = 3.0
x = 3 - 0.8
x = 2.2
0.8 + x = 3.0
x = 3 - 0.8
x = 2.2
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