What is the portfolio beta?
Answer: 1.12
Working
Formula for calculating Portfolio Beta (PB) is as follows
Portfolio Beta = (BQ * WQ) + (BR * WR) + (BS * WS) + (BT * WT)
Where,
BQ = Beta of Stock Q = 1.32
BR = Beta of Stock R = 1.5
BS = Beta of Stock S = 1.05
BT = Beta of Stock T = .75
WQ = Weight of Stock Q =30%
WR = Weight of Stock R = 20%
WS = Weight of Stock S =15%
WT = Weight of Stock T = 35%
Portfolio Beta = (BQ * WQ) + (BR * WR) + (BS * WS) + (BT * WT)
= (1.32 * 30%) + (1.5 * 20%) + (1.05 * 15%) + (.75 * 35%)
= .3960 + .3000 + .1575 + .2625
= 1.1160
= 1.12
You own a stock portfolio invested 30 percent in Stock Q, 20 percent in Stock R,...
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