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You have a $42,000 portfolio consisting of Intel, GE, and Con Edison. You put $22,400 in...

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Finance

You have a $42,000 portfolio consisting of Intel, GE, and ConEdison. You put $22,400 in Intel, $8,800 in GE, and the rest in ConEdison. Intel, GE, and Con Edison have betas of 1.3, 1, and .8,respectively. What is your portfolio beta?

A.1.109

B. 0.941

C. 0.853

D. 1.441

Answer & Explanation Solved by verified expert
4.3 Ratings (819 Votes)

Information provided:

Portfolio value= $42,000

Investment in Intel= $22,400

Investment in GE= $8,800

Investment in Con Edison= $42,000 – ($22,400 + $8,800)

                                                 = $10,800

Weight of Intel= $22,400/$42,000

                             = 0.5333*100= 53.33%

Weight of GE= $8,800/ $42,000

                         = 0.2095*100= 20.95%

Weight of Con Edison= $10,800/ $42,000

                                         = 0.2571*100= 25.71%

Portfolio beta= 0.5333*1.3 + 0.2095*1 + 0.2571*0.8

                          = 0.6933 + 0.2095 + 0.2057

                          = 1.1085   1.109.

Hence, the answer is option a.

In case of any query, kindly comment on the solution.
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Transcribed Image Text

You have a $42,000 portfolio consisting of Intel, GE, and ConEdison. You put $22,400 in Intel, $8,800 in GE, and the rest in ConEdison. Intel, GE, and Con Edison have betas of 1.3, 1, and .8,respectively. What is your portfolio beta?A.1.109B. 0.941C. 0.853D. 1.441

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