What is the beta of the following portfolio? Stock Beta Investment 1.2 $150,000 $180,000 с 0.5...

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What is the beta of the following portfolio? Stock Beta Investment 1.2 $150,000 $180,000 с 0.5 $130,000 1.4 $140,000 Round to

Answer 1

Answer #1

Beta of portfolio is weighted average of the beta of constituents

Total portfolio size = $150,000 + $180,000 + $130,000 + $140,000 = $500,000

Weight of A = $150,000/$500,000 = 30%

Weight of B = $180,000/$500,000 = 36%

Weight of C = $130,000/$500,000 = 26%

Weight of D = $140,000/$500,000 = 28%

Beta of portfolio = Beta1 * Weight1 + Beta2 * Weight2 +..... + Beta n * Weight n

Beta of portfolio = 30% * 1.2 + 36% * 0.7 + 26% * 0.5 + 28% * 1.4

Beta of portfolio = 0.36 + 0.252 + 0.13 + 0.392

Beta of portfolio = 1.13

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Answer 2

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