Warren has a portfolio with three stocks as shown in the table. What is the beta of Warren's portfolio? $$\begin{array} { | c | c | c | c | }
\hline \text { Stock } & \begin{array} { c }
\text { Required } \
\text { Return }
\end{array} & \begin{array} { c }
\text { Portfolio } \
\text { Weight }
\end{array} & \text { Beta } \
\hline \text { Raymond's } & 6.75 \% & 0.4 & 0.50 \
\hline \begin{array} { c }
\text { Keller } \
\text { Industries }
\end{array} & 11.43 \% & 0.35 & 1.50 \
\hline \text { Huron Power } & 9.27 \% & 0.25 & 1.05 \
\hline
\end{array}$$
A)0.775
B)0.988
C)1.017
D)1.340
E)1.505

Question

Warren has a portfolio with three stocks as shown in the table. What is the beta of Warren's portfolio? $$\begin{array} { | c | c | c | c | } 
\hline \text { Stock } & \begin{array} { c } 
\text { Required } \
\text { Return }
\end{array} & \begin{array} { c } 
\text { Portfolio } \
\text { Weight }
\end{array} & \text { Beta } \
\hline \text { Raymond's } & 6.75 \% & 0.4 & 0.50 \
\hline \begin{array} { c } 
\text { Keller } \
\text { Industries }
\end{array} & 11.43 \% & 0.35 & 1.50 \
\hline \text { Huron Power } & 9.27 \% & 0.25 & 1.05 \
\hline
\end{array}$$
A)0.775
B)0.988
C)1.017
D)1.340
E)1.505

Quizplus · Accepted Answer

The beta of the portfolio is calculated as the weighted average of the betas of the individual stocks: (0.4 * 0.50) + (0.35 * 1.50) + (0.25 * 1.05) = 0.988.

Warren Has a Portfolio with Three Stocks as Shown in the Table