Question

A stock’s beta is the _____. Portfolio beta is the _____ of the betas of the...

A stock’s beta is the _____. Portfolio beta is the _____ of the betas of the stocks that comprise the portfolio.

A. sensitivity of its returns to market returns; weighted average
B. sensitivity of its returns to changes in interest rates; weighted average
C. sensitivity of returns to market returns; simple average
D. sensitivity of returns to changes in interest rates; weighted average
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Answer #1

A stock’s beta is the _____. Portfolio beta is the _____ of the betas of the stocks that comprise the portfolio.

correct answer : A : sensitivity of its returns to market returns; weighted average

explanation : beta is a relationship between stock & market. if beta is more than 1, it implies that stock will rise or decline more than market. So clearly beta indicates sensitivity of stock returns with market returns.

portfolio beta is nothing but sum of multiplication of weight and beta of stocks that are included in portfolio. So it is a weighted average and not simple average.

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