Homework Help

A stock portfolio is made of 25% A, 20% B, 45% C and 10% D and the beta value of the...

user profile pic

good2beme | Student, Undergraduate | Honors

Posted November 27, 2012 at 5:22 PM via web

dislike 1 like

A stock portfolio is made of 25% A, 20% B, 45% C and 10% D and the beta value of the stocks are 0.80, 0.94, 1.4 and 1.52 resp. What is the portfolio beta?

1 Answer | Add Yours

user profile pic

justaguide | College Teacher | (Level 2) Distinguished Educator

Posted November 27, 2012 at 5:39 PM (Answer #1)

dislike 1 like

The beta of a stock portfolio is the weighted average of the beta of each stock. If the beta value of A, B, C and D is 0.80, 0.94, 1.4, 1.52 respectively and the percentage of the portfolio made up by each of the stocks is 25%, 20%, 45% and 10% respectively the beta of the stock portfolio is 0.8*0.25 + 0.94*0.2 + 1.4*0.45 + 1.52*0.1 = 1.17

The beta of the stock portfolio is 1.17.

Join to answer this question

Join a community of thousands of dedicated teachers and students.

Join eNotes