The risk free rate is 5% and the market risk premium is 10%. The Ka equals 25% and the Kb equals 20%. What is the beta of a portfolio that contains only stocks A and B if 1/5 of funds are invested in A and the rest in B?
Instructors answer is Beta of portfolio equals 1.6
Show steps to obtain this solution.© BrainMass Inc. brainmass.com June 3, 2020, 9:12 pm ad1c9bdddf
By CAPM, the stock's required return rate is
K = risk free rate + beta * market risk premium
Thus, beta = (K - risk free ...
This solution provides calculations for betas in capital asset pricing.