Question

1. You own a stock portfolio invested 15 percent in Stock Q, 35 percent in Stock R, 20 percent in Stock S, and 30 percent in Stock T. The betas for these four stocks are .85, 56, 1.20, and 1.15, respectively. What is the portfolio beta?

Answer 1

Portfolio Beta is the weightage average beta of individual securities in the portfolio.

NOTE:- In the above questiin, you have given Beta of stock R as 56, i think it is typing mistake and it should be 0.56. I have solved the question taking Beta as 0.56

Portfolio Beta = [ Beta(Q) * weight(Q) ] + [ Beta(R) * weight(R) ] + [ Beta(S) * weight(S) ] + [ Beta(T) * weight(T) ]

Portfolio beta = [0.85 * 0.15] + [0.56*0.35] + [1.2 * 0.20] + [1.15 * 0.30]

Protfolio beta = 0.9085

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