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a stock has a beta of 1.17 and an expected return of 15.4 percent. a risk-free asset currently earns 4.7 percent. the beta of a portfolio comprised of these two assets is .76. what percentage of the portfolio is invested in the stock?

Respuesta :

65% is the percentage of the portfolio that invested in the stock.


What is stock portfolio?

It is a collection of stocks that you invest in with the hope of making a profit. By putting together a diverse portfolio that spans various sectors you're able to become a more resilient investor.

From the question, we need to calculate the percentage of the portfolio invested in the stock.

Portfolio beta = (B1 * W1) + (B2 * W2)
0.76 = (1.17 * W1) + (0*W2)

B2 = Beta of risk free asset is zero
0.76 = 1.17 * W1

W1 = [tex]\frac{0.76}{1.17}[/tex]
= 0.649572 = 65% (rounded)

So, the percentage of the portfolio that invested in the stock is 65%

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