Beta of a portfolio. The beta of four stocks—G, H, I, and J—are 0.48, 0.86, 1.25, and 1.53, respectively. What is the beta of a portfolio with the following weights in each asset?
|
Weight in Stock G |
Weight in Stock H |
Weight in Stock I |
Weight in Stock J |
||||||
|
Portfolio 1 |
25% |
25% |
25% |
25% |
|||||
|
Portfolio 2 |
30% |
40% |
20% |
10% |
|||||
|
Portfolio 3 |
10% |
20% |
40% |
30% |
|||||
What is the beta of portfolio 1? _____(Round to two decimal places.)
What is the beta of portfolio 2? _____(Round to two decimal places.)
What is the beta of portfolio 3?______ (Round to two decimal places.)
Portfolio 1:
Portfolio Beta = Weight of Stock G * Beta of Stock G + Weight of
Stock H * Beta of Stock H + Weight of Stock I * Beta of Stock I +
Weight of Stock J * Beta of Stock J
Portfolio Beta = 25% * 0.48 + 25% * 0.86 + 25% * 1.25 + 25% *
1.53
Portfolio Beta = 1.03
Portfolio 2:
Portfolio Beta = Weight of Stock G * Beta of Stock G + Weight of
Stock H * Beta of Stock H + Weight of Stock I * Beta of Stock I +
Weight of Stock J * Beta of Stock J
Portfolio Beta = 30% * 0.48 + 40% * 0.86 + 20% * 1.25 + 10% *
1.53
Portfolio Beta = 0.89
Portfolio 3:
Portfolio Beta = Weight of Stock G * Beta of Stock G + Weight of
Stock H * Beta of Stock H + Weight of Stock I * Beta of Stock I +
Weight of Stock J * Beta of Stock J
Portfolio Beta = 10% * 0.48 + 20% * 0.86 + 40% * 1.25 + 30% *
1.53
Portfolio Beta = 1.18
Get Answers For Free
Most questions answered within 1 hours.