You have invested in stocks W and X. From the following information, determine the beta for your portfolio. $\begin{array}{llll}
& \begin{array}{l}
\text { Expected } \
\text { Retum }
\end{array} & \begin{array}{l}
\text { Amount of } \
\text { Investment }
\end{array} & \text { Beta } \
\text { Stock W } & 10 \% & \$ 100,000 & 1.40 \
\text { Stock X } & 8 \% & \$ 300,000 & 0.80
\end{array}$
A) 0.85
B) 0.95
C) 1.00
D) 1.10
E) 2.20

Question

You have invested in stocks W and X. From the following information, determine the beta for your portfolio. $\begin{array}{llll} 
& \begin{array}{l}
\text { Expected } \
\text { Retum }
\end{array} & \begin{array}{l}
\text { Amount of } \
\text { Investment }
\end{array} & \text { Beta } \
\text { Stock W } & 10 \% & \$ 100,000 & 1.40 \
\text { Stock X } & 8 \% & \$ 300,000 & 0.80
\end{array}$
A) 0.85
B) 0.95
C) 1.00
D) 1.10
E) 2.20

Quizplus · Accepted Answer

The portfolio beta is calculated as a weighted average of the individual betas, based on the proportion of the total investment in each stock. The total investment is $400,000. The weight of Stock W is $100,000/$400,000 = 0.25, and the weight of Stock X is $300,000/$400,000 = 0.75. The portfolio beta = (0.25 * 1.40) + (0.75 * 0.80) = 0.95.

You Have Invested in Stocks W and X A) 085 B) 0

You Have Invested in Stocks W and X A) 085
B) 0