Tom O'Brien has a 2-stock portfolio with a total value of $100,000.$65,000 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42.What is his portfolio's beta? Do not round your intermediate calculations.Round your final answer to 2 decimal places.
A) 0.94
B) 0.98
C) 0.88
D) 0.90
E) 1.15

Question

Quizplus · Accepted Answer

The portfolio's beta is calculated as the weighted average of the betas of the individual stocks. The weight of each stock is determined by its proportion of the total portfolio value. For Stock A, the weight is $65,000 / $100,000 = 0.65, and for Stock B, it's $35,000 / $100,000 = 0.35. The portfolio's beta is then (0.65 * 0.75) + (0.35 * 1.42) = 0.4875 + 0.497 = 0.9845, which rounds to 0.98.

Tom O'Brien Has a 2-Stock Portfolio with a Total Value