Jim Keys holds a $200,000 portfolio consisting of the following stocks: Stock Investment Beta Alpha $50,000...
Jim Keys holds a $200,000 portfolio consisting of the following
stocks:
|
Stock |
Investment |
Beta |
||
|---|---|---|---|---|
|
Alpha |
$50,000 | 0.50 | ||
|
Beta |
$50,000 | 0.80 | ||
|
Gamma |
$50,000 | 1.00 | ||
|
Delta |
$50,000 | 1.30 |
What is the portfolio's beta?
Homework Answers
| Total Portfolio value = Value of Alpha + Value of Beta + Value of Gamma + Value of Delta |
| =50000+50000+50000+50000 |
| =200000 |
| Weight of Alpha = Value of Alpha/Total Portfolio Value |
| = 50000/200000 |
| =0.25 |
| Weight of Beta = Value of Beta/Total Portfolio Value |
| = 50000/200000 |
| =0.25 |
| Weight of Gamma = Value of Gamma/Total Portfolio Value |
| = 50000/200000 |
| =0.25 |
| Weight of Delta = Value of Delta/Total Portfolio Value |
| = 50000/200000 |
| =0.25 |
| Beta of Portfolio = Weight of Alpha*Beta of Alpha+Weight of Beta*Beta of Beta+Weight of Gamma*Beta of Gamma+Weight of Delta*Beta of Delta |
| Beta of Portfolio = 0.5*0.25+0.8*0.25+1*0.25+1.3*0.25 |
| Beta of Portfolio = 0.9 |
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