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PORTFOLIO BETA An individual has $45,000 invested in a stock with a beta of 0.8 and another...

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Finance

PORTFOLIO BETA

An individual has $45,000 invested in a stock with a beta of 0.8and another $30,000 invested in a stock with a beta of 2.5. Ifthese are the only two investments in her portfolio, what is herportfolio's beta? Round your answer to two decimal places.

Answer & Explanation Solved by verified expert
4.3 Ratings (615 Votes)

Portfolio Beta              1.480
Working:
# 1: Calculation of weight of security:
Stock A $       45,000
Stock B $       30,000
Total $       75,000
Weight of:
Stock A $       45,000 / $ 75,000 = 0.6
Stock B $       30,000 / $ 75,000 = 0.4
# 2:Calculation of beta of portfolio:
Weight Beta
a b a*b
Stock A 0.6 0.8         0.480
Stock B 0.4 2.5         1.000
Total         1.480
So, beta of portfolio is         1.480

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PORTFOLIO BETAAn individual has $45,000 invested in a stock with a beta of 0.8and another $30,000 invested in a stock with a beta of 2.5. Ifthese are the only two investments in her portfolio, what is herportfolio's beta? Round your answer to two decimal places.

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