Answer: 0.91

## Explanation The beta of a portfolio is calculated using the formula: $$\beta = \rho \frac{\sigma(\text{portfolio})}{\sigma(\text{benchmark})}$$ Where: - $\rho$ = correlation coefficient between portfolio and benchmark returns = 0.7 - $\sigma(\text{portfolio})$ = volatility of portfolio returns = 6.5% = 0.065 - $\sigma(\text{benchmark})$ = volatility of benchmark returns = 5.0% = 0.05 Substituting the values: $$\beta = 0.7 \cdot \frac{0.065}{0.05} = 0.7 \cdot 1.3 = 0.91$$ Therefore, the beta of the portfolio with respect to its benchmark is 0.91, which corresponds to option D. **Key points:** - Beta measures the sensitivity of a portfolio's returns to the benchmark's returns - A beta of 0.91 indicates the portfolio is slightly less volatile than the benchmark - The calculation uses correlation and the ratio of volatilities

Author: LeetQuiz .