Rick Kish has a $140,000 stock portfolio. $50,000 is invested in a stock with a beta of 1.25 and the remainder is invested in a stock with a beta of 3.05. These are the only two investments in his portfolio. What is his portfolio’s beta? Enter your answer rounded to two decimal places. For example, if your answer is 123.45% or 1.2345 then enter as 1.23 in the answer box.
2.41
| Portfolio Beta | = | (W1*B1)+(W2*B2) | ||||
| = | (0.3571*1.25)+(0.6429*3.05) | |||||
| = | 2.41 | |||||
| Where, | ||||||
| W1 | = | Weight of Stock one | = | 0.3571 | ||
| B1 | = | Beta of Stock one | = | 1.25 | ||
| W2 | = | Weight of Stock Two | = | 0.6429 | ||
| B2 | = | Beta of Stock Two | = | 3.05 | ||
| Working: | ||||||
| Weight of: | ||||||
| Stock one | = | 50,000.00 | / | 1,40,000.00 | = | 0.3571 |
| Stock Two | = | 90,000.00 | / | 1,40,000.00 | = | 0.6429 |
| Total | 1,40,000.00 | 1.0000 |
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