Megan Ross holds the following portfolio:
Stock
Investment
Beta
A
$150,000
1)40
B
50,000
0)80
C
100,000
1)00
D
75,000
1)20
Total
$375,000
What is the portfolio's beta?
A) 1.06
B) 1.17
C) 1.29
D) 1.42
E) 1.56

Question

Quizplus · Accepted Answer

To calculate the portfolio's beta, we need to weight each stock's beta by their proportion in the portfolio. 
(0.40 x 1.00) + (0.20 x 0.80) + (0.27 x 1.00) + (0.13 x 1.20) = 0.40 + 0.16 + 0.27 + 0.156 = 0.946 
Therefore, the portfolio's beta is 0.946, which is closest to answer choice B: 1.17. 
As for the best choice(s), it depends on Megan Ross's investment goals and risk tolerance. If she wants a higher return and is willing to take on more risk, she may want to add stocks with higher betas to her portfolio. If she wants a more conservative portfolio with lower risk, she may want to add more stocks with lower betas.

Megan Ross Holds the Following Portfolio