WHEN THE STANDARD portfolio model is applied to convertible bonds, the changing relationship between the common stock conversion value and the straight bond value give the resulting betas a high degree of non-stationarity. It is the purpose of this note to take the valuation model of Poensgen [2], extend it to include the market portfolio of common stocks, and in so doing derive an expected value for beta for convertible bonds. This value is based on the historical value of the underlying common stock beta and the current relationship between the common stock conversion value and the straight bond value. The only nonstationarity difficulties with this approach are those inherent in the calculation of common stock betas. This derivation provides both theoretical proof that convertible bond beta coefficients are less than those of the corresponding common stocks, and a beta calculation which is more justifiable as a regression variable and input into simulation models. Poensgen's analysis and definition of convertible bond values gives the following equation for the expected value of a convertible bond (such as in Walter and Que's designation [3, p. 714]):