396,186 views
20 votes
20 votes
Isabel invested in four-stock portfolio; she invested 20 percent of her money in Stock A, 30 percent of her money in Stock B, 25 percent of her money in Stock C, and 25 percent of her money in Stock D. The betas for Stock A, B, C, and D are 0.4, 1.2, 2.5, and 1.75, respectively, and their expected returns are 12 percent, 24 percent, 30 percent, and 28 percent, respectively. What is the beta of Isabel's portfolio

User Adrichman
by
2.4k points

1 Answer

12 votes
12 votes

Answer: 1.50

Step-by-step explanation:

Isabel's portfolio beta is a weighted average of the individual stock betas.

= Weight of stock A * Stock A beta + Weight of stock B * Stock B beta + Weight of stock n * Stock n beta

= (20% * 0.4) + (30% * 1.2) + ( 25% * 2.5) + (25% * 1.75)

= 0.08 + 0.36 + 0.625 + 0.4375

= 1.5025

= 1.50

User Paul Hargreaves
by
2.7k points