Kip owns the following portfolio of securities. What is the beta for the portfolio?
A) 1.00
B) 1.50
C) 1.74
D) 1.98

Question

Kip owns the following portfolio of securities. What is the beta for the portfolio? 
A) 1.00 
B) 1.50 
C) 1.74 
D) 1.98

Quizplus · Accepted Answer

To calculate the beta for the portfolio, we need to take the weighted average of the betas of each security in the portfolio. Using the information provided in the table, we can calculate the weighted average beta as:

(0.4 x 2.0) + (0.3 x 1.5) + (0.3 x 1.0) = 1.5

Therefore, the beta for the portfolio is 1.5, which means that the portfolio is 50% more volatile than the market as a whole. The best choice is B.

Kip Owns the Following Portfolio of Securities