Question

Tom O'Brien has a 2-stock portfolio with a total value of $100,000. $65,000 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his portfolio's beta

Answer 1

Beta= 0.9845

Step-by-step explanation:

Giving the following information:

Stock A:

Investment= $65,000

Beta= 0.75

Stock B:

Investment= $35,000

Beta= 1.42

To calculate the beta of the portfolio, we need to use the following formula:

Beta= (proportion of investment A*beta A) + (proportion of investment B*beta B)

Beta= (0.65*0.75) + (0.35*1.42)

Beta= 0.9845