You have a portfolio with a beta of 1.01. What will be the new portfolio beta if you keep 30...

Question:

You have a portfolio with a beta of 1.01. What will be the new portfolio beta if you keep 30 percent of your money in the old portfolio and 70 percent in a stock with a beta of 1.61?

Beta:

Beta is a used as a measure of risk in the world of finance. A beta of 1 means that the stock moves in line with the broader market. A beta greater than 1 means the stock moves more or is more volatile than the broader market. The higher the beta, the more return is required by investors to compensate for the additional risk.

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The answer is: 1.43

Portfolio beta is the weighted average of the betas for each security in the portfolio.

You can use the following formula to...

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Using the Systematic Risk Principle & Portfolio Beta

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Chapter 12 / Lesson 3
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In this lesson, we'll discuss how investors must understand the systematic risk principle in their portfolio. We'll also explain how investors can measure and define the risk of their portfolios using betas.


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