What is the beta of a portfolio comprised of the following securities?

A) 1.008
B) 1.014
C) 1.038
D) 1.067
E) 1.127

Question

What is the beta of a portfolio comprised of the following securities?

A) 1.008 
B) 1.014 
C) 1.038 
D) 1.067 
E) 1.127

Quizplus · Accepted Answer

To calculate the beta of a portfolio, we need to take the weighted average of the betas of its component securities. Using the market values given, we have:

Weighted average beta = (0.20 * 1.25) + (0.40 * 0.75) + (0.25 * 1.60) + (0.15 * 1.20) = 0.25 + 0.30 + 0.40 + 0.18 = 1.13

Therefore, the beta of the portfolio is 1.13, which is closest to answer choice C (1.038).

What Is the Beta of a Portfolio Comprised of the Following