Andrew has the following portfolio of assets. $$\begin{array} { l c l }
& \text { Proportion of } & \
\text { Stock } & \text { Portfolio } & \text { Beta } \
\hline \text { ABC } & \$ 8.000 & 1.10 \
\text { DEF } & \$ 11,000 & .95 \
\text { GHI } & \$ 6,000 & 1.05 \
\hline
\end{array}$$ What is the beta of Andrew's portfolio?
A) 0.98
B) 1.00
C) 1.02
D) 1.03

Question

Andrew has the following portfolio of assets. $$\begin{array} { l c l } 
& \text { Proportion of } & \
\text { Stock } & \text { Portfolio } & \text { Beta } \
\hline \text { ABC } & \$ 8.000 & 1.10 \
\text { DEF } & \$ 11,000 & .95 \
\text { GHI } & \$ 6,000 & 1.05 \
\hline
\end{array}$$ What is the beta of Andrew's portfolio?
A) 0.98
B) 1.00
C) 1.02
D) 1.03

Quizplus · Accepted Answer

The beta of Andrew's portfolio is calculated by taking the weighted average of the betas of the individual stocks, using the proportion of each stock in the portfolio as weights. The total value of the portfolio is $8,000 + $11,000 + $6,000 = $25,000. The calculation is as follows:$$ \text{Portfolio Beta} = \left( \frac{8,000}{25,000} \times 1.10 \right) + \left( \frac{11,000}{25,000} \times 0.95 \right) + \left( \frac{6,000}{25,000} \times 1.05 \right) $$$$ \text{Portfolio Beta} = (0.352 \times 1.10) + (0.44 \times 0.95) + (0.24 \times 1.05) $$$$ \text{Portfolio Beta} = 0.3872 + 0.418 + 0.252 = 1.0572 $$Rounding to two decimal places, the portfolio beta is approximately 1.02.

Andrew Has the Following Portfolio of Assets What Is the Beta of Andrew's Portfolio? A) 0

Andrew Has the Following Portfolio of Assets What Is the Beta of Andrew's Portfolio?
A) 0