You Want Your Portfolio Beta to Be

Multiple Choice

You want your portfolio beta to be .95. Currently, your portfolio consists of $4,000 invested in Stock A with a beta of 1.26 and $7,000 in Stock B with a beta of .94. You have another $8,000 to invest and want to divide it between an asset with a beta of 1.74 and a risk-free asset. How much should you invest in the risk-free asset?

A) $3,966
B) $4,425
C) $4,902
D) $4,305
E) $5,083