Question

g An individual has $20,000 invested in a stock with a beta of 0.8 and another $50,000 invested in a stock with a beta of 1.6. If these are the only two investments in her portfolio, what is her portfolio's beta

Answer 1

1.37

Step-by-step explanation:

The computation of the portfolio beta is shown below:

Value Weight Beta Weighted Beta

of Investment of Investment (weight of value × beta)

$20,000 0.2857 0.8 0.22856

$50,000 0.7143 1.6 1.14288

Total = $70,000 1 1.37

We simply multiplied the weight of investment with the beta of each investment so that the portfolio beta could come