A portfolio is comprised of two stocks. Stock A comprises 65% of the portfolio and has a beta of 1.21. Stock B has a beta of .95. What is the portfolio beta?
A).96
B)1.05
C)1.12
D)1.19
E)1.21

Question

Quizplus · Accepted Answer

To find the portfolio beta, we can use the following formula:
Portfolio Beta = (Weight of Stock A * Beta of Stock A) + (Weight of Stock B * Beta of Stock B)
Substituting the given values, we get:
Portfolio Beta = (0.65 * 1.21) + (0.35 * 0.95)
Portfolio Beta = 0.7865 + 0.3325
Portfolio Beta = 1.12
Therefore, the answer is choice letter C.

A Portfolio Is Comprised of Two Stocks