Answer : the beta of the investor’s overall portfolio =c) 0.83
Working notes for the above answer is as under
We have provided that
investor divides her portfolio into thirds,
with one part in Treasury bills, one part in a market index,
Beta pf the market portfollio is always 1
and one part in a diversified portfolio with beta of 1.50.
Now we will calculate beta of the investor’s overall portfolio as follow
| Portion | Beta | Beta of Portfolio |
| 0.333333 | 0 | 0 |
| 0.333333 | 1 | 0.33 |
| 0.333333 | 1.5 | 0.5 |
| 0.83 |
So the beta of beta of the investor’s overall portfolio =0.83
