Jonathan has the following portfolio of assets. What is the beta of Jonathan's portfolio?
A) 1.08
B) 1.11
C) 1.13
D) 1.15

Question

Jonathan has the following portfolio of assets.  What is the beta of Jonathan's portfolio?
A) 1.08 
B) 1.11 
C) 1.13 
D) 1.15

Quizplus · Accepted Answer

To calculate the portfolio beta, we need to take the weighted average of each asset's beta.

Total portfolio value = $35,000 + $25,000 + $15,000 + $25,000 = $100,000

Weight of first stock = $35,000 / $100,000 = 0.35 
Weight of second stock = $25,000 / $100,000 = 0.25 
Weight of third stock = $15,000 / $100,000 = 0.15 
Weight of fourth stock = $25,000 / $100,000 = 0.25

Portfolio beta = (0.35 x 1.20) + (0.25 x 0.90) + (0.15 x 1.50) + (0.25 x 1.25) = 1.13

Therefore, the answer is C) 1.13.

Jonathan Has the Following Portfolio of Assets