Question

You own 500 shares of Stock A at a price of $60 per share, 405
shares of Stock B at $80 per share, and 500 shares of Stock C at
$41 per share. The betas for the stocks are .8, 1.8, and .7,
respectively. What is the beta of your portfolio? |

Beta |

Answer #1

Total Portfolio value = price of Stock A*Shares of Stock A + price of Stock B*Shares of Stock B + price of Stock C*Shares of Stock C |

=60*500+80*405+41*500 |

=82900 |

Weight of Stock A = price of Stock A*Shares of Stock A/Total Portfolio Value |

= 30000/82900 |

=0.3619 |

Weight of Stock B = price of Stock B*Shares of Stock B/Total Portfolio Value |

= 32400/82900 |

=0.3908 |

Weight of Stock C = price of Stock C*Shares of Stock C/Total Portfolio Value |

= 20500/82900 |

=0.2473 |

Beta of Portfolio = Weight of Stock A*Beta of Stock A+Weight of Stock B*Beta of Stock B+Weight of Stock C*Beta of Stock C |

Beta of Portfolio = 0.8*0.3619+1.8*0.3908+0.7*0.2473 |

Beta of Portfolio = 1.17 |

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