Answer: 1.3

## Explanation The portfolio beta (β) is calculated using the formula: $$ \beta = \rho \frac{\sigma(\text{portfolio})}{\sigma(\text{benchmark})} $$ Where: - β = beta of the portfolio - ρ = correlation between the portfolio and the benchmark = 0.65 - σ(portfolio) = standard deviation (volatility) of the portfolio = 6% = 0.06 - σ(benchmark) = standard deviation of the benchmark = 3% = 0.03 Substituting the values: $$ \beta = 0.65 \times \frac{0.06}{0.03} = 0.65 \times 2 = 1.3 $$ Therefore, the portfolio's beta is **1.3**, which corresponds to option B. ### Key Points: - Beta measures the sensitivity of a portfolio's returns to benchmark returns - A beta of 1.3 means the portfolio is expected to be 30% more volatile than the benchmark - The formula shows that beta depends on both the correlation and the relative volatilities of the portfolio and benchmark

Author: Tanishq Prabhu