Question

The beta of four stocks—​G,​H, I, and J—are 0.41​, 0.72​, 1.07​, and 1.63​, respectively. What is the beta of a portfolio with the following weights in each​ asset.

Weight in Stock G   Weight in Stock H   Weight in Stock I   Weight in Stock J
Portfolio 1   25%   25%   25%   25%
Portfolio 2   30%   40%   20%   10%
Portfolio 3   10%   20%   40%   30%

What is the beta of portfolio​ 1?

Answer 1

a) Calculating Beta of portfolio 1:-

Stock	Weights	Beta	Weight*Beta
G	0.25	0.41	0.1025
H	0.25	0.72	0.18
I	0.25	1.07	0.2675
J	0.25	1.63	0.4075
			0.9575

So, the beta of portfolio​ 1 is 0.9575

b) Calculating Beta of portfolio 2:-

Stock	Weights	Beta	Weight*Beta
G	0.30	0.41	0.1230
H	0.40	0.72	0.2880
I	0.20	1.07	0.2140
J	0.10	1.63	0.1630
			0.7880

So, the beta of portfolio​ 2 is 0.7880

c) Calculating Beta of portfolio 3:-

Stock	Weights	Beta	Weight*Beta
G	0.10	0.41	0.0410
H	0.20	0.72	0.1440
I	0.40	1.07	0.4280
J	0.30	1.63	0.4890
			1.1020

So, the beta of portfolio​ 3 is 1.1020

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