Question
Jason Jackson is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. He is particularly interested in
Jason Jackson is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data:
Portfolio Weights | |||
Asset | Asset Beta | Portfolio A | Portfolio B |
1 | 1.35 | 16% | 28% |
2 | 0.72 | 25% | 15% |
3 | 1.25 | 6% | 22% |
4 | 1.05 | 6% | 15% |
5 | 0.86 | 47% | 20% |
Total | 100% | 100% |
a. Calculate the betas for portfolios A and B. round to 3 decimal places
b. Compare the risk of each portfolio to the market as well as to each other. Which portfolio is more risky?
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