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How does the new portfolio's Beta will increase to 1.45

AFM

Hi Sir, to increase the beta of the portfolio to 1.45, you told us to borrow 1.3 crores from risk free security by shorting it and invest that 1.3 crores again in x & y ltd shares in their existing proportions. even we increase the amount of investments in those securities, since we invested in the same proportion the overall beta of the portfolio will still remain 1.15 right ? please provide me the calculation of how the revised beta will be 1.45 . i have attached my calculation for your reference. please correct me if anything is wrong in it. Video Details ------------- Advanced Financial Management - AFM Derivatives Analysis and Valuation #47. Illustration #24

B. Dinesh

CA Final

★ 3K+

18-May-24 16:41

Answers (1)

I numerator add one more number (-1.3 x 0) because we have shorted Rf in denominator add one more number ( -1.3) because we have shorted Rf Numerator will now be 7.245 Denominator will be 5 7.245 / 5 = 1.45

Sriram Somayajula

Admin

18-May-24 17:50

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