Jim Angel holds a $200,000 portfolio consisting of the following stocks: What is the portfolio's beta?
A) 0.938
B) 0.988
C) 1.037
D) 1.089
E) 1.143

Question

Quizplus · Accepted Answer

To calculate the portfolio beta, we need to first calculate the weight of each stock in the portfolio:

Stock A: $75,000 / $200,000 = 0.375 weight
Stock B: $50,000 / $200,000 = 0.25 weight
Stock C: $75,000 / $200,000 = 0.375 weight

Next, we need to calculate the beta of each stock:

Stock A beta = 1.2
Stock B beta = 0.8
Stock C beta = 1.1

Finally, we can calculate the portfolio beta using the following formula:

Portfolio beta = (Weight of Stock A * Beta of Stock A) + (Weight of Stock B * Beta of Stock B) + (Weight of Stock C * Beta of Stock C)

Portfolio beta = (0.375 * 1.2) + (0.25 * 0.8) + (0.375 * 1.1) = 0.988

Therefore, the best choice is B (0.988).

Jim Angel Holds a $200,000 Portfolio Consisting of the Following