Martin Ortner holds a $200,000 portfolio consisting of the following stocks: $$\begin{array} { c r r }
\text { Stock } & \text { Investment } & \text { Beta } \
\hline \text { A } & \$ 50,000 & 0.95 \
\text { B } & 50,000 & 0.80 \
\text { C }& 50,000 & 1.00 \
\text { D } & 50,000 & 1.20 \
\text { Total } & \underline{\$ 200,000} &
\end{array}$$ What is the portfolio's beta?
A)0.938
B)0.988
C)1.037
D)1.089
E)1.143

Question

Martin Ortner holds a $200,000 portfolio consisting of the following stocks: $$\begin{array} { c r r } 
\text { Stock } & \text { Investment } & \text { Beta } \
\hline \text { A } & \$ 50,000 & 0.95 \
\text { B } & 50,000 & 0.80 \
\text { C }& 50,000 & 1.00 \
\text { D } & 50,000 & 1.20 \
\text { Total } & \underline{\$ 200,000} &
\end{array}$$ What is the portfolio's beta?
A)0.938
B)0.988
C)1.037
D)1.089
E)1.143

Quizplus · Accepted Answer

The portfolio's beta is calculated by taking the weighted average of the betas of the individual stocks. Each stock represents 25% of the portfolio. Thus, the portfolio's beta = (0.25 * 0.95) + (0.25 * 0.80) + (0.25 * 1.00) + (0.25 * 1.20) = 0.9875, which rounds to 0.988.

Martin Ortner Holds a $200,000 Portfolio Consisting of the Following