Question

Your company has a total investment of $500 million in five companies:

Company Investment ($MM) Beta
A 130 0.3
B 160 1.5
C 70 3.2
D 90 2.0
E 50 1.0
Total 500

What is the beta of this portfolio?

Answer 1

Beta= 1.466

Step-by-step explanation:

First, we need to determine the proportion of each investment in the portfolio:

A= 130/500= 0.26

B= 160/500= 0.32

C= 70/500= 0.14

D= 90/500= 0.18

E= 50/500= 0.1

Now, 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= (0.26*0.3) + (0.32*1.5) + (0.14*3.2) + (0.18*2) + (0.1*1)

Beta= 1.466