Question

You own $25,607 of Olympic Steel stock that has a beta of 2.72. You also own $14,128 of Rent-a-Center (beta = 1.98) and $4,415 of Lincoln Educational (beta = 0.71).

What is the beta of your portfolio? (Do not round intermediate calculation and round your answer to 2 decimal places.)

Portfolio beta

Answer 1

Amount invested in Olympic Steel Stock = $25,607
Beta of Olympic Steel Stock = 2.72

Amount invested in Rent-a-Center = $14,128
Beta of Rent-a-Center = 1.98

Amount invested in Lincoln Educational = $4,415
Beta of Lincoln Educational =0.71

Total Amount Invested = Amount invested in Olympic Steel Stock + Amount invested in Rent-a-Center + Amount invested in Lincoln Educational
Total Amount Invested = $25,607 + $14,128 + $4,415
Total Amount Invested = $44,150

Weight of Olympic Steel Stock = $25,607 / $44,150
Weight of Olympic Steel Stock = 0.58

Weight of Rent-a-Center = $14,128 / $44,150
Weight of Rent-a-Center = 0.32

Weight of Lincoln Educational = $4,415 / $44,150
Weight of Lincoln Educational = 0.10

Portfolio Beta = 0.58 * 2.72 + 0.32 * 1.98 + 0.10 * 0.71
Portfolio Beta = 2.28