The beta of the portfolio is 1.5.
How to calculate the beta portfolio?
We will use the capital asset pricing model.
According to this, the expected return on an asset is:
Expected return = risk free rate + beta * (market return - risk free rate)
In this question, we are given:
Return, [tex]r_f=5 \%[/tex]
Market return, [tex]E_r_m=15\%[/tex],
Portfolio expected return, [tex]E_r_P=21.50\%[/tex]
Applying the CAPM:
beta = (21.50% - 5%) / (16% - 5%)
beta = 1.5
To learn more about beta portfolio, refer to:
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