What is the Beta of a three-stock portfolio including 25% of Stock A with a Beta of .90, 40% Stock B with a Beta of 1.05, and 35% Stock C with a Beta of 1.73?
A)1.05
B)1.17
C)1.22
D)1.25 Portfolio Beta = (.25 x 0.9) + (.4 x 1.05) + (.35 x 1.73)
= )225 + .42 + .606

Question

Quizplus · Accepted Answer

The Beta of the three-stock portfolio is calculated as follows:
Portfolio Beta = (.25 x 0.9) + (.4 x 1.05) + (.35 x 1.73)
= 0.225 + 0.42 + 0.606
= 1.251
Therefore, the Beta of the three-stock portfolio is 1.25 (rounded to two decimal places). The best choice is option D.

What Is the Beta of a Three-Stock Portfolio Including 25