A portfolio is composed of $2,000 invested in Stock A, $3,000 in Stock B, $4,000 in Stock C, and $5,000 in Stock D.What is the beta of the portfolio if the betas of Stock A, B, C, and D are 0.9, 1.6, 1.8 and 1.2, respectively?
A)1.03
B)1.26
C)1.41
D)1.65

Question

Quizplus · Accepted Answer

The portfolio beta is calculated as the weighted average of the individual stock betas. The weights are the proportion of the total investment in each stock. Total investment = $2,000 + $3,000 + $4,000 + $5,000 = $14,000. Portfolio beta = (2000/14000)*0.9 + (3000/14000)*1.6 + (4000/14000)*1.8 + (5000/14000)*1.2 = 1.41.

A Portfolio Is Composed of $2,000 Invested in Stock A