Martin Ortner holds a $200,000 portfolio consisting of the following stocks: $\begin{array}{crr}\text { Stock }&\text { Investment }&\text { Beta }\
\text { A } & \$ 50,000 & 0.95 \
\text { B } & 50,000 & 0.80 \
\text { C } & 50,000 & 1.00 \
\text { D } & 50,000 & 1.20 \
\text { Total } & \$ 200,000 &
\end{array}$
What is the portfolio's beta?
A) 0.938
B) 0.988
C) 1.037
D) 1.089
E) 1.143

Question

Martin Ortner holds a $200,000 portfolio consisting of the following stocks: $\begin{array}{crr}\text { Stock }&\text { Investment }&\text { Beta }\
\text { A } & \$ 50,000 & 0.95 \
\text { B } & 50,000 & 0.80 \
\text { C } & 50,000 & 1.00 \
\text { D } & 50,000 & 1.20 \
\text { Total } & \$ 200,000 &
\end{array}$ 
What is the portfolio's beta?
A) 0.938
B) 0.988
C) 1.037
D) 1.089
E) 1.143

Quizplus · Accepted Answer

The portfolio's beta is calculated as the weighted average of the individual betas, with each investment's proportion of the total portfolio used as weights. Here, each stock represents 25% of the portfolio. Thus, the portfolio's beta = (0.25 * 0.95) + (0.25 * 0.80) + (0.25 * 1.00) + (0.25 * 1.20) = 0.9875, which rounds to 0.988.

Martin Ortner Holds a $200,000 Portfolio Consisting of the Following