Determine the beta of a portfolio consisting of the following common stocks: $$\begin{array} { l c c }
\text { Security } & \text { Market Value } & \text { Beta } \
\text { Glaxo } & \$ 2,600 & 1.24 \
\text { SCANA } & 3,700 & 0.88 \
\text { BancOne } & 2,900 & 0.95 \
\text { Pepsi } & 3,400 & 1.05 \
\text { AFLAC } & 3,000 & 1.09 \
\text { Votec } & 4,400 & 1.41
\end{array}$$
A) 1.00
B) 1.12
C) 1.09
D) 1.11

Question

Determine the beta of a portfolio consisting of the following common stocks: $$\begin{array} { l c c } 
\text { Security } & \text { Market Value } & \text { Beta } \
\text { Glaxo } & \$ 2,600 & 1.24 \
\text { SCANA } & 3,700 & 0.88 \
\text { BancOne } & 2,900 & 0.95 \
\text { Pepsi } & 3,400 & 1.05 \
\text { AFLAC } & 3,000 & 1.09 \
\text { Votec } & 4,400 & 1.41
\end{array}$$
A) 1.00
B) 1.12
C) 1.09
D) 1.11

Quizplus · Accepted Answer

The beta of a portfolio is the weighted average of the betas of the individual securities, with the weights being the proportion of each security's market value to the total market value of the portfolio. The total market value of the portfolio is $2,600 + $3,700 + $2,900 + $3,400 + $3,000 + $4,400 = $20,000. The weighted beta is calculated as follows: $$ \frac{2,600}{20,000} \times 1.24 + \frac{3,700}{20,000} \times 0.88 + \frac{2,900}{20,000} \times 0.95 + \frac{3,400}{20,000} \times 1.05 + \frac{3,000}{20,000} \times 1.09 + \frac{4,400}{20,000} \times 1.41 = 1.11. $$

Determine the Beta of a Portfolio Consisting of the Following