Question

Amanda has the following portfolio of assets.

stock. proportion of portfolio beta

ABC   $370 0.85

DEF $360 0.25

GHI $760 1.1

Multiple Choice

a.)0.83

b.)1.08

c.)0.73

d.)0.62

Answer 1

Given about a portfolio,

Investment in stock A = $370

Investment in stock B = $360

Investment in stock C = $760

So, total investment = 370 + 360 +760 = $1490

So, weight of stock A, Wa = investment in stock A/total investment= 370/760 = 0.2483

So, Weight of stock B, Wb = 360/1490 = 0.2416

Weight of stock C, Wc = 760/1490 = 0.5101

So, Beta of portfolio is weighted average beta of stock

=> Beta of stock = Wa*Ba + Wb*Bb + Wc*Bc = 0.2483*0.85 + 0.2416*0.25 + 0.5101*1.1 = 0.83

Option A is correct.