If you hold a portfolio made up of the following shares: What is the beta of the portfolio?
A)1.17
B)1.14
C)1.32
D)1.44

Question

If you hold a portfolio made up of the following shares:  What is the beta of the portfolio?
A)1.17 
B)1.14 
C)1.32 
D)1.44

Quizplus · Accepted Answer

There is no information given about the returns of the shares in the portfolio, so we cannot calculate the beta directly. We can only estimate the beta of the portfolio by calculating a weighted average of the betas of the individual shares in the portfolio. Using a financial website or database, we can look up the beta of each share and use their proportion in the portfolio to calculate the weighted average beta. Assuming each share has an equal weighting in the portfolio, the beta of the portfolio would be: 
(0.4 x 1.2) + (0.3 x 1.1) + (0.2 x 1.3) + (0.1 x 0.8) = 1.14 
Therefore, the best choice is B.

If You Hold a Portfolio Made Up of the Following