Question

You have a $50,000 portfolio consisting of Intel, GE and Con Edison. You put $20,000 in Intel, $15,000 in GE, and $15,000 in Con Edison. Intel, GE, and COn Edison have betas of 1.3, 1.0, and 0.8, respectively. What is your portfolio beta?

Answer 1

Portfolio beta = (Weight of Intel * Beta of Intel) + (Weight of GE * Beta of GE) + (Weight of Con Edison * Beta of Con Edison)

Portfolio beta = [($20,000/$50,000) * 1.3] + [($15,000/$50,000) * 1.0] + [($15,000/$50,000) * 0.8]

Portfolio beta = 1.06