Your portfolio has a beta of 1.39. The portfolio consists of 14 percent U.S. Treasury bills, 23 percent Stock A, and 63 percent Stock B. Stock A has a risk level equivalent to that of the overall market. What is the beta of Stock B

A beta is a measure of systematic risk. A risk free rate has zero risk thus its beta is zero. As, the T bills are risk free, so their beta is also zero. While the beta of the market is always 1. So, the beta of stock A is 1.

The portfolio beta is a function of the weighted average of the individual stocks betas that form up the portfolio. The formula for portfolio beta is,

Portfolio beta = wA * Beta A + wB * Beta B + ... + wN * Beta N

Where,

w represents the weight of each stock in the portfolio based on the investment in that stock

1.39 = 0.14 * 0 + 0.23 * 1 + 0.63 * Beta of B

1.39 = 0 + 0.23 + 0.63 * Beta of B

1.39 - 0.23 = 0.63 * Beta of B

1.16 / 0.63 = Beta of B

Beta of B = 1.84