Question

Collette has four different stocks in her portfolio. She owns 79 shares of Stock A with a market price of $41.00, 137 shares of Stock B which is currently at $66.00 per share, 163 shares of Stock C which is listed at $87.00 per share, and 259 shares of Stock D, with a price of $75.00 per share. If the betas and returns for the four stocks are as follows, What is Collette ’s portfolio beta and portfolio return?

Stock A Beta: 1.1 Return: 5%

Stock B Beta: .95 Return: 3%

Stock C Beta: 1.75 Return: 10%

Stock D Beta: 1.36 Return: 8%

Portfolio Beta:

Portfolio Return:

Answer 1

	Total value(Shares*Market price)	beta	Return
A	(79*41)=$3239	1.1	5%
B	(137*66)=$9042	0.95	3%
C	(163*87)=$14181	1.75	10%
D	(259*75)=$19425	1.36	8%
	Total=$45887

Portfolio return=Respective return*Respective investment weights

=(3239/45887*5)(9042/45887*3)+(14181/45887*10)+(19425/45887*8)

=7.42%(Approx).

Portfolio beta=Respective betas*Respective investment weights

=(3239/45887*1.1)+(9042/45887*0.95)+(14181/45887*1.75)+(19425/45887*1.36)

=1.38(Approx).