O'Brien has a 2-stock portfolio with a total value of $100,000.$37,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42.What is his portfolio's beta?
A)1.17
B)1.23
C)1.29
D)1.35
E)1.42

Question

Quizplus · Accepted Answer

The portfolio's beta is calculated as the weighted average of the individual stock betas. The weight of Stock A is $37,500/$100,000 = 0.375, and the weight of Stock B is $62,500/$100,000 = 0.625. The portfolio beta is (0.375 * 0.75) + (0.625 * 1.42) = 1.17.

O'Brien Has a 2-Stock Portfolio with a Total Value of $100,000.$37,500