You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R,...

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You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R,...

You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R, 15 percent in Stock S, and 45 percent in Stock T. The betas for these four stocks are 0.44, 1.27, 1.02, and 1.32, respectively. What is the portfolio beta?

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Answer 1

Answer #1

Beta of portfolio is weighted average of the beta of individual constituents within the portfolio.

Beta of portfolio = W1 * Beta1 + Beta2 * W2 + ..............

In this question,

Beta of portfolio = 20% * 0.44 + 20% * 1.27 + 15% * 1.02 + 45% * 1.32

Beta of portfolio = 0.088 + 0.254 + 0.153 + 0.594

Beta of portfolio = 1.089

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Answer 2

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