What is the beta of a portfolio if 20% of the funds are invested in Stock A with a beta of 2, 30% in Stock B with a beta of 0.8, 15% in Stock C with a beta of 2.2, and the remainder in Stock D with a beta of 1.4?
A)1.23
B)1.46
C)1.74
D)1.98

Question

Quizplus · Accepted Answer

To calculate the beta of a portfolio, we must take the weighted average of the betas of each stock in the portfolio. 
Beta of Portfolio = (Weight of Stock A * Beta of Stock A) + (Weight of Stock B * Beta of Stock B) + (Weight of Stock C * Beta of Stock C) + (Weight of Stock D * Beta of Stock D) 
= (0.2 * 2) + (0.3 * 0.8) + (0.15 * 2.2) + (0.35 * 1.4) 
= 0.4 + 0.24 + 0.33 + 0.49 
= 1.46

Therefore, the answer is B.

What Is the Beta of a Portfolio If 20% of the Funds