Explanation:
The beta for a portfolio is the weighted average of the betas of individual assets. Thus, the beta for the 4-asset portfolio above = 1.3 * 0.3 + 0.97 * 0.23 + 1.7 * 0.37 + 1.4 * 0.1 = 1.4. Note: The market risk-free rate is useless in this question.
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Q.189 You have been given the following asset weights and betas for a 4-asset portfolio:
| Asset | Beta | Portfolio Weight |
|---|---|---|
| 1 | 1.3 | 30% |
| 2 | 0.97 | 23% |
| 3 | 1.7 | 37% |
| 4 | 1.4 | 10% |
If the market risk-free rate is 5%, what is the portfolio beta?
A
1.6
B
2.3
C
1.4
D
0.3
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