A portfolio comprises Coke (beta of 1.4)and Wal-Mart (beta of 1.0).The amount invested in Coke is $10,000 and in Wal-Mart is $20,000.What is the beta of the portfolio?

Question

Quizplus · Accepted Answer

The portfolio beta is calculated as a weighted average of the individual betas. The weights are based on the proportion of the total investment. The total investment is $30,000. The weight for Coke is $10,000/$30,000 = 1/3, and for Wal-Mart is $20,000/$30,000 = 2/3. The portfolio beta = (1/3 * 1.4) + (2/3 * 1.0) = 0.467 + 0.667 = 1.134, which rounds to 1.13.

A Portfolio Comprises Coke (Beta of 1