Question

Mike Flannery holds the following portfolio: Stock Investment Beta A $150,000 1.40 B 50,000 0.80 C 100,000 1.00 D 75,000 1.20 Total ​ $375,000 ​ What is the portfolio's beta?

Answer 1

Answer: 1.174

Explanation:

• Portfolio beta is the weighted-average of the beta coefficient of all the individual stocks in a portfolio.

As per given , we have  

Stock Investment Weight  (W)            Beta(B)              (W) x (B)

                                   $\text{(Investment}/\text{Total investnment})$

 

A            150,000     0.40                      1.40         0.56

B             50,000      0.13                      0.80         0.104

C            100,000     0.27                      1.00         0.27

D             75,000             0.20                      1.20         0.24

       

Total            375,000            1.00                                     1.174

Hence, the portfolio's beta = 1.174