Points 2 Portfolio betas bF Swxb Portfolio B Portfolio A Ass

Points: /2 Portfolio betas: bF Sw.xb Portfolio B Portfolio A Asset Beta WB 11v 4

Solution

a)Beta of portfolio A = 0.935,  

Beta of portfolio B = 1.110

b) Beta of A = 0.935 which is less risky than market whose beta =1
Beta of B = 1.110  which is more risky than market whose beta =1
Higher the beta more is the risk involved in the portfolio

Hence portfolio B is more risky than Portfolio A

Asset	Asset Beta	Portfolio A	Asset Beta * Weight of Asset	Portfolio B	Asset Beta * Weight of Asset
1	1.3	10%	0.13	30%	0.39
2	0.7	30%	0.21	10%	0.07
3	1.25	10%	0.125	20%	0.25
4	1.1	10%	0.11	20%	0.22
5	0.9	40%	0.36	20%	0.18
		Sum=	0.935	Sum=	1.110