Question

An investor currently holds the following portfolio:                                  &nb

An investor currently holds the following portfolio:

                                       Amount

                                      Invested

8,000 shares of Stock    A $10,000    Beta = 1.5

15,000 shares of Stock  B $20,000    Beta = 0.8

25,000 shares of Stock  C $20,000    Beta = 1.2

Calculate the beta for the portfolio.

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Answer #1
Total Portfolio value = Value of Stock A + Value of Stock B + Value of Stock C
=10000+20000+20000
=50000
Weight of Stock A = Value of Stock A/Total Portfolio Value
= 10000/50000
=0.2
Weight of Stock B = Value of Stock B/Total Portfolio Value
= 20000/50000
=0.4
Weight of Stock C = Value of Stock C/Total Portfolio Value
= 20000/50000
=0.4
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 = 1.5*0.2+0.8*0.4+1.2*0.4
Beta of Portfolio = 1.1
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