Stock A has a beta of 1.2,Stock B's beta is 1.46,and Stock C's beta is .72.If you invest $2,000 in Stock A,$3,000 in Stock B,and $5,000 in Stock C,what will be the beta of your portfolio?
A)1.008
B)1.014
C)1.038
D)1.067
E)1.127

Question

Quizplus · Accepted Answer

To calculate the beta of the portfolio, we need to take the weighted average of the individual stock betas.

Beta of portfolio = (2,000/10,000) x 1.2 + (3,000/10,000) x 1.46 + (5,000/10,000) x 0.72
 = 0.24 + 0.438 + 0.36
 = 1.038
 
Therefore, the beta of the portfolio is 1.038, which is closest to option C (1.038).

Stock a Has a Beta of 1