You have a portfolio with a beta of 147 What will be the new

You have a portfolio with a beta of 1.47. What will be the new portfolio beta if you keep 86 percent of your money in the old portfolio and 14 percent in a stock with a beta of 0.69? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Solution

THE OLD PORTFOLIO HAS BETA OF 1.47

NOW AS ONE MORE ASSET IS ADDED, WE HAVE TO CALCULATE REVISED BETA.

NEW PORTFOLIO BETA = (Weight of existing portfolio x beta of portfolio) + (Weight of newly added stock x beta of stock)

NEW PORTFOLIO BETA = (0.86 X 1.47) + (0.14 X 0.69) = 1.3608 = 1.36

ANSWER : NEW PORTFOLIO BETA = 1.36