A portfolio comprises Cochlear (beta of 1.4) and Westpac (beta of 1.0). The amount invested in Cochlear is $10,000 and in Westpac is $20,000. What is the beta of the portfolio?

Question

Quizplus · Accepted Answer

The portfolio beta is calculated as a weighted average of the individual betas. The weights are based on the proportion of the total investment. For Cochlear: $10,000/$30,000 = 0.3333 and for Westpac: $20,000/$30,000 = 0.6667. Portfolio beta = (0.3333 * 1.4) + (0.6667 * 1.0) = 1.1333, which rounds to 1.13.

A Portfolio Comprises Cochlear (Beta of 1