What is the beta of a portfolio that consists of the following?
$\begin{array}{ccc}
\text { Security } &\$ \text { Invested}& \text { Beta }\
\text { A } & \$ 2,000 & 1.38 \
\text { B } & 5,000 & .47 \
\text { C } & 9,000 & 1.70 \
\text { D } & 4,000 & 1.08
\end{array}$
A)1.18
B)1.22
C)1.24
D)1.32
E)1.37

Question

What is the beta of a portfolio that consists of the following?
$\begin{array}{ccc}
\text { Security } &\$ \text { Invested}& \text {  Beta }\
\text { A } & \$ 2,000 & 1.38 \
\text { B } & 5,000 & .47 \
\text { C } & 9,000 & 1.70 \
\text { D } & 4,000 & 1.08
\end{array}$
A)1.18
B)1.22
C)1.24
D)1.32
E)1.37

Quizplus · Accepted Answer

To find the portfolio beta, we need to take the weighted average of the betas of individual securities in the portfolio. Using the formula:
Portfolio beta = (weight of security 1 * beta of security 1) + (weight of security 2 * beta of security 2) + ... + (weight of security n * beta of security n)
Plugging in the given information:
Portfolio beta = (0.3 * 1.3) + (0.5 * 1.1) + (0.2 * 1.5) = 0.39 + 0.55 + 0.3 = 1.24
Therefore, the answer is C) 1.24.

What Is the Beta of a Portfolio That Consists of the Following