Homework Answers
Weight of Stock A = Investment in Stock A / Total
Investment
Weight of Stock A = $440,000 / $4,580,000
Weight of Stock A = 0.0961
Weight of Stock B = Investment in Stock B / Total
Investment
Weight of Stock B = $800,000 / $4,580,000
Weight of Stock B = 0.1747
Weight of Stock C = Investment in Stock C / Total
Investment
Weight of Stock C = $1,240,000 / $4,580,000
Weight of Stock C = 0.2707
Weight of Stock D = Investment in Stock D / Total
Investment
Weight of Stock D = $2,100,000 / $4,580,000
Weight of Stock D = 0.4585
Portfolio Beta = Weight of Stock A * Beta of Stock A + Weight of
Stock B * Beta of Stock B + Weight of Stock C * Beta of Stock C +
Weight of Stock D * Beta of Stock D
Portfolio Beta = 0.0961 * 1.50 + 0.1747 * (-0.50) + 0.2707 * 1.25 +
0.4585 * 0.75
Portfolio Beta = 0.73905
Portfolio Required Return = Risk-free Rate + Portfolio Beta *
(Market Return - Risk-free Rate)
Portfolio Required Return = 4.00% + 0.73905 * (8.00% - 4.00%)
Portfolio Required Return = 4.00% + 0.73905 * 4.00%
Portfolio Required Return = 6.96%
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