Question

You own a stock portfolio invested 32 percent in Stock Q, 19 percent in Stock R, 38 percent in Stock S, and 11 percent in Stock T. The betas for these four stocks are 1.01, 1.07, 1.47, and 1.92, respectively. What is the portfolio beta?

Answer 1

Portfolio beta = 1.2963

Step-by-step explanation:

The portfolio beta is the function of the weighted average of the individual stock betas that form up the portfolio. The formula to calculate the beta of a portfolio is as follows,

Portfolio beta = wA * Beta of A + wB * Beta of B + .... + wN * Beta of N

Where,

• w represents the weight of each stock in the portfolio

Portfolio Beta = 0.32 * 1.01 + 0.19 * 1.07 + 0.38 * 1.47 + 0.11 * 1.92

Portfolio beta = 1.2963