Homework Help Forum: Finance

Posted by brandon on Monday, October 26, 2009 at 10:26pm.

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?

• Finance - Ms. Sue, Monday, October 26, 2009 at 11:01pm

  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

  
  

Answer this Question

First Name:
School Subject:
Answer:

For Further Reading