Question

What is the beta of a 3-stock portfolio including 25% of stock A with a beta of 0.90, 40% of stock B with a beta of 1.05, and 35% of stock C with a beta of 1.73

Answer 1

The beta of the 3-stock portfolio can be calculated using the weights and betas of each stock in the portfolio.

Step-by-step explanation:

To find the beta of a portfolio, we need to calculate the weight of each stock and multiply it by their respective betas, and then sum up the results. In this case, stock A has a weight of 25% and a beta of 0.90, stock B has a weight of 40% and a beta of 1.05, and stock C has a weight of 35% and a beta of 1.73.

Using the formula, the beta of the 3-stock portfolio can be calculated as follows:

Beta = (Weight of A * Beta of A) + (Weight of B * Beta of B) + (Weight of C * Beta of C)

Substituting the values:

Beta = (0.25 * 0.90) + (0.40 * 1.05) + (0.35 * 1.73) = 1.1275

Therefore, the beta of the 3-stock portfolio is 1.1275.

Answer 2

1.25

Step-by-step explanation:

Calculation for What is the beta of a 3-stock portfolio

Portfolio beta = (.25 *0.9) + (.4 *1.05) + (.35 *1.73)

Portfolio beta = .225 + .42 + .606

Portfolio beta = 1.25

Therefore the beta of a 3-stock portfolio will be 1.25