Rene owns the following portfolio of securities.What is the beta for the portfolio? $$\begin{array} { | l | c | c | }
\hline { \text { Company } } & \text { Beta } & \text { Percent of Portfolio } \
\hline \text { Microsoft } & 1.82 & 50 \% \
\hline \mathrm { GM } & 0.53 & 30 \% \
\hline \text { Dullco } & 0.67 & 20 \% \
\hline
\end{array}$$
A)1.20
B)1.50
C)1.74
D)1.98

Question

Rene owns the following portfolio of securities.What is the beta for the portfolio? $$\begin{array} { | l | c | c | } 
\hline  { \text { Company } } & \text { Beta } & \text { Percent of Portfolio } \
\hline \text { Microsoft } & 1.82 & 50 \% \
\hline \mathrm { GM } & 0.53 & 30 \% \
\hline \text { Dullco } & 0.67 & 20 \% \
\hline
\end{array}$$
A)1.20
B)1.50
C)1.74
D)1.98

Quizplus · Accepted Answer

The portfolio beta is calculated by multiplying the beta of each security by its percentage weight in the portfolio and then summing these products. For Rene's portfolio: $$ (1.82 \times 0.50) + (0.53 \times 0.30) + (0.67 \times 0.20) = 0.91 + 0.159 + 0.134 = 1.203 $$ Rounding to two decimal places, the portfolio beta is 1.20.

Rene Owns the Following Portfolio of Securities A)120 B)1

Rene Owns the Following Portfolio of Securities A)120
B)1