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 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?

Homework Answers

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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