Tom 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 betas of the individual stocks. The weight for Stock A is $37,500/$100,000 = 0.375 and for Stock B is $62,500/$100,000 = 0.625. The portfolio beta = (0.375 * 0.75) + (0.625 * 1.42) = 1.17.

Tom O'Brien Has a 2-Stock Portfolio with a Total Value