You are considering a portfolio of three shares with 30% of your money invested in company X,45% of your money invested in company Y,and 25% of your money invested in company Z.If the betas for each share are 1.22 for company X,1.46 for company Y,and 1.03 for company Z,what is the portfolio beta?
A)1.24
B)1.00
C)1.28
D)1.33

Question

Quizplus · Accepted Answer

To calculate the portfolio beta, we use the formula:
Portfolio Beta = (Weight of Company X * Beta of Company X) + (Weight of Company Y * Beta of Company Y) + (Weight of Company Z * Beta of Company Z)
Substituting the given values, we get:
Portfolio Beta = (0.30 * 1.22) + (0.45 * 1.46) + (0.25 * 1.03) = 0.366 + 0.657 + 0.258 = 1.281
Therefore, the portfolio beta is 1.28, which is closest to option C (1.28).

You Are Considering a Portfolio of Three Shares with 30