Question

Mike Flannery holds the following portfolio: Stock Investment Beta A $150,000 1.40 B 50,000 0.80 C 100,000 1.00 D 75,000 1.20 Total ​ $375,000 ​ What is the portfolio's beta?

Answer 1

Answer: 1.174

Explanation:

• Portfolio beta is the weighted-average of the beta coefficient of all the individual stocks in a portfolio.

As per given , we have

Stock Investment Weight (W) Beta(B) (W) x (B)

`\text{(Investment}/\text{Total investnment})`

A 150,000 0.40 1.40 0.56

B 50,000 0.13 0.80 0.104

C 100,000 0.27 1.00 0.27

D 75,000 0.20 1.20 0.24

Total 375,000 1.00 1.174

Hence, the portfolio's beta = 1.174