Answer (C) is correct . Beta is the best measure of the risk of an individual security held in a diversified portfolio because it determines how the security affects the risk of the portfolio. The beta of a portfolio is the weighted average of the betas of the individual securities. For example, adding high-beta securities to a portfolio tends to increase its risk. Hence, the beta of the portfolio is .9 [(.8 ¡Á .2) + (.6 ¡Á .4) + (1.0 ¡Á .3) + (2.0 ¡Á .1)].
Answer (A) is incorrect because The figure 2.0 is the highest beta.
Answer (B) is incorrect because The figure 1.1 is a simple average of the betas.
Answer (D) is incorrect because The figure .8 is the lowest beta.
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The beta of the portfolio is
