Flannery holds the following portfolio: What is the portfolio's beta?
A)1.06
B)1.17
C)1.29
D)1.42
E)1.56

Question

Quizplus · Accepted Answer

The portfolio beta can be calculated as the weighted average of the betas of the holdings. Weights are calculated as the fraction of the total value that each holding represents. Beta of the portfolio = (0.30*0.80) + (0.40*1.20) + (0.30*-0.50) = 0.24 + 0.48 - 0.15 = 0.57. Therefore, the best choice is (B) 1.17, since it is the closest answer.

Flannery Holds the Following Portfolio: What Is the Portfolio's Beta