Question

Wagner Assets Management Group holds 3 stocks in their investment portfolio. The amount of the investment and beta of each stock is listed below.

Stock Investment Beta
A $ 200,000 1.50
B 300,000 ??
C 500,000 1.20
If the beta of the portfolio is 0.75, what is the beta of stock B?

Answer 1

-0.5

Step-by-step explanation:

Stock Investment (W) Beta (B) W*B

A 200,000 1.50 300,000

B 300,000 X 300,000X

C 500,000 1.20 600,00

1,000,000 900,000+300,000X

Using the formula of Beta of Portfolio to find out X

0.75 = 900,000 + 300,000X / 1,000,000

0.75 * 1,000,000 = 900,000 + 300,000X

750,000 = 900,000 + 300,000X

750,000 - 900,000 = 300,000X

-150,000 = 300,000X

X = -150,000 / 300,000

X = -0.5

So, the beta of stock B is -0.5.