Question

A portfolio comprises Coke​ (beta of 1.1​) and​ Wal-Mart (beta of 1​). The amount invested in Coke is​ $10,000 and in​ Wal-Mart is​ $20,000. What is the beta of the​ portfolio?

Answer 1

Answer:

Beta= 1.133

Explanation:

Giving the following information:

Coke:

beta= 1.1​

Investment= $10,000

Wal-Mart:

beta= 1

Investment= $20,000

First, we need to calculate the proportion of investments:

Coke= 10,000/30,000= 0.33

Wal-Mart= 20,000/30,000= 0.77

Now, to calculate the beta of the portfolio, we need to use the following formula:

Beta= (proportion of investment A*beta A) + (proportion of investment B*beta B)

Beta= (0.33*1.1) + (0.77*1)

Beta= 1.133