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**CFA Practice Question**

The beta of a portfolio that has 49% of the wealth in the market portfolio and the rest in the risk-free asset has a beta of ______.

A. There is insufficient information to calculate this figure.

B. 0.51

C. 0.49

**Explanation:**If your wealth is divided between the market portfolio and the risk-free asset, the portfolio beta equals the fraction invested in the market portfolio. You can prove this easily using the CAPM.

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**User Contributed Comments**
5

User |
Comment |
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kamal3r |
Interesting because the market portfolio has a beta of 1 therefore the weighted beta is 0.49 |

rwales |
0.49=49%*1(beta of market portfolio) + 51*0 (returns of risk free asset do not change!) |

rrichmondo |
Great question - I forgot the market has a beta of 1 by definition - doh :) |

mekc |
must remember to read all the words in the question.... skipped the word market... |

Ifi2703 |
Remember that the beta is all about the risk relative to the market. If 51% of the portfolio is, essentially, risk-free logic suggests that the risky part of the portfolio will be 49%. |