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You own a portfolio which is invested equally in two stocks and a risk-free security. The stock betas are .89 for Stock A and 1.26
You own a portfolio which is invested equally in two stocks and a risk-free security. The stock betas are .89 for Stock A and 1.26 for Stock B. Which one of the following will increase the portfolio beta, all else constant? |
decreasing the weight of Stock B and increasing the weight of Stock A
replacing Stock A with a security that has a beta of .77
increasing the weight of Stock A and decreasing the weight of the risk-free security
replacing Stock B with Stock C, which has a beta equal to that of the market
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