Question

18) You have a portfolio made up of three stocks -- Stock A makes up 40%, stock B is 15%, and stock C is 45%. Stock A has a beta of 1.16, stock B’s beta is 1.47 and stock C ‘s beta is .42. What is the beta of your portfolio?

Answer 1

0.8735

Step-by-step explanation:

Data provided in the question:

Stock Weight Beta

A 40% 1.16

B 15% 1.47

A 45% 0.42

Now,

The Portfolio beta = ∑ (Stock beta × Stock investment weights )

Therefore,

The Portfolio beta = ( 0.4 × 1.16 ) + ( 0.15 × 1.47 ) + ( 0.45 × 0.42 )

or

The Portfolio beta = 0.464 + 0.2205 + 0.189

or

The Portfolio beta = 0.8735