An investor has a four stock portfolio: $25,000 in Comcast, which has a beta of 1.08; $25,000 in Coca Cola Bottling Company, which has a beta of .50; $50,000 in Microsoft, which has a beta of .98; and $100,000 in Apple, Inc., which has a beta of 1.21. The beta of this investor's portfolio is closest to:
A) 0.685
B) 1.0000
C) 1.0475
D) 3.7700

Question

Quizplus · Accepted Answer

The beta of the portfolio is calculated by taking the weighted average of the betas of the individual stocks, with the weights being the proportion of the total investment in each stock. The total investment is $200,000 ($25,000 + $25,000 + $50,000 + $100,000). The calculation is as follows:- Comcast: ($25,000 / $200,000) * 1.08 = 0.135- Coca Cola: ($25,000 / $200,000) * 0.50 = 0.0625- Microsoft: ($50,000 / $200,000) * 0.98 = 0.245- Apple: ($100,000 / $200,000) * 1.21 = 0.605Adding these together gives a portfolio beta of 0.135 + 0.0625 + 0.245 + 0.605 = 1.0475.

An Investor Has a Four Stock Portfolio: $25,000 in Comcast