Question

f. If you formed a portfolio that consisted of 50% Goodman stock and 50% Landry stock, what would be its beta and its required return? The beta of a portfolio is simply a weighted average of the betas of the stocks in the portfolio, so this portfolio's beta would be: Portfolio beta =

Answer 1

For beta calculation
	Goodman industries	Landry Incorporated	Index
2013	11.44	83.63	7058.96
2014	17.06	90	8403.42
2015	16.13	85.88	9651.05
2016	24.75	73.13	13019.97
2017	22.13	78.45	13178.55
2018	25.88	73.13	17495.97
	For returns like for 2018: use P2018/P2017-1 in %
	Goodman industries	Landry Incorporated	Index
2013
2014	49%	8%	19%
2015	-5%	-5%	15%
2016	53%	-15%	35%
2017	-11%	7%	1%
2018	17%	-7%	33%
Beta	26%	-55%

So for f : 0.5*0.26+0.5*(-0.55) = -0.15

	Beta	weight
Goodman	0.26	0.25
Stock A	0.769	0.15
Stock B	0.985	0.4
Stock C	1.423	0.2
portfolio beta	0.85895

For return calculation, please provide more data such as Risk free rate, market return can be taken as 20.56% (index return).

So risk premium would be market return - Risk free rate