Mike Flannery holds the following portfolio: $\begin{array}{lrr}\text { Stock }&\text { Investment }&\text { Beta }\
A & \$ 150,000 & 1.40 \
\mathrm{~B} & \$ 10,000 & 0.80 \
\mathrm{C} & \$ 140,000 & 1.00 \
\mathrm{D} & \$ 75,000 & 1.20\
\text { Total }&\$375,000
\end{array}$
What is the portfolio's beta? Do not round your intermediate calculations.
A) 1.19
B) 1.36
C) 1.30
D) 1.47
E) 1.45

Question

Quizplus · Accepted Answer

The portfolio's beta is calculated by taking the weighted average of the betas of the individual investments. The weights are the proportion of each investment in the total portfolio. The calculation is as follows:$$\text{Portfolio Beta} = \left(\frac{\$150,000}{\$375,000} \times 1.40\right) + \left(\frac{\$10,000}{\$375,000} \times 0.80\right) + \left(\frac{\$140,000}{\$375,000} \times 1.00\right) + \left(\frac{\$75,000}{\$375,000} \times 1.20\right)$$$$= (0.40 \times 1.40) + (0.0267 \times 0.80) + (0.3733 \times 1.00) + (0.20 \times 1.20)$$$$= 0.56 + 0.02136 + 0.3733 + 0.24$$$$= 1.19466$$Rounded to two decimal places, the portfolio's beta is 1.19.

Mike Flannery Holds the Following Portfolio What Is the Portfolio's Beta? Do Not Round Your Intermediate