You decide to form a portfolio of the following amounts invested in the following stocks. What...
You decide to form a portfolio of the following amounts invested in the following stocks. What is the beta of the portfolio?
|
Stock |
Amount |
Beta |
Expected Return |
|
Exxon |
$2,000 |
0.60 |
9% |
|
IBM |
$3,000 |
0.95 |
13% |
|
General Motors |
$1,000 |
1.15 |
13% |
|
Microsoft |
$4,000 |
1.35 |
14% |
a) 1.01 c) 12.6 e) 4.05
b) 1.06 d) 51.6
Homework Answers
Total Value of Portfolio =2000+3000+1000+4000=10000
Beta of Portfolio =Weight of Exxon*Beta of Exxon+Weight of IBM*Beta
of IBM+Weight of General Motors*Beta of General Motors+Weight of
Microsoft*Beta of Microsoft
=2000/10000*0.6+3000/10000*0.95+1000/10000*1.15+4000/10000*1.35
=1.06
Option b is correct option
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