Warren has a portfolio with three stocks as shown in the table.What is the beta of Warren's portfolio?

A) 0.775
B) 0.988
C) 1.017
D) 1.340
E) 1.505

Question

Warren has a portfolio with three stocks as shown in the table.What is the beta of Warren's portfolio?

A) 0.775 
B) 0.988 
C) 1.017 
D) 1.340 
E) 1.505

Quizplus · Accepted Answer

Take the weighted average of the individual betas to find the portfolio beta. β_p = w₁β₁+ . . . + w_nβ_n β_p = (0.40 × 0.50) + (0.35 × 1.50) + (0.25 × 1.05) β_p = 0.20 + 0.525 + 0.2625 = 0.9875 or 0.988

Warren Has a Portfolio with Three Stocks as Shown in the Table.What