Question

You place half your wealth into tivo stock and the other half into intel bonds. tivo stock's beta = 1.2 and intel bonds' beta is 0.90. calculate the portfolio beta

Answer 1

Weight to wealth in the tivo stock = w1 = 0.5

Weight to wealth in intel bonds = w2 = 0.5

Tivo stock beta (beta1) = 1.2

Intel bond beta (beta2) = 0.90

Portfolio (beta) = w1beta1 + w2beta2 = 0.5 x 1.2 + 0.5 x 0.9

The answer is 1.05