Question

Mike Flannery holds the following portfolio: Stock Investment Beta A $150,000 1.40 B $10,000 0.80 C $140,000 1.00 D $75,000 1.20 Total $375,000 What is the portfolio's beta? Do not round your intermediate calculations.

Answer 1

Beta= 1.195

Step-by-step explanation:

Giving the following information:

Stock Investment Beta

A $150,000 1.40

B $10,000 0.80

C $140,000 1.00

D $75,000 1.20

Total $375,000

First, we need to calculate the proportion of investment of each stock:

A= 150,000/375,000= 0.40

B= 10,000/375,000= 0.027

C= 140,000/375,000= 0.373

D= 75,000/375,000= 0.2

Now, to calculate the beta of the portfolio, we need to use the following formula:

Beta= (proportion of investment A*beta A) + (proportion of investment B*beta B)... etc

Beta= (0.4*1.4) + (0.027*0.8) + (0.373*1) + (0.2*1.2)

Beta= 1.195