Assume a portfolio is made up of three stocks: $\begin{array} { | l | l | l | l | }
\hline & \text { Expected } & \text { Investment } & \text { Beta } \
\hline & \text { Return } & & \
\hline \text { Stock A } & 18 \% & \$ 150,000 & 1.20 \
\hline \text { Stock B } & 14 \% & \$ 150,000 & 1.00 \
\hline \text { Stock C } & 12 \% & \$ 300,000 & 0.80 \
\hline & & \$ 600,000 & \
\hline
\end{array}$The portfolio's beta is:
A) 0.95.
B) 1.15.
C) 1.00.
D) None of the above

Question

Assume a portfolio is made up of three stocks: $\begin{array} { | l | l | l | l | } 
\hline & \text { Expected } & \text { Investment } & \text { Beta } \
\hline & \text { Return } & & \
\hline \text { Stock A } & 18 \% & \$ 150,000 & 1.20 \
\hline \text { Stock B } & 14 \% & \$ 150,000 & 1.00 \
\hline \text { Stock C } & 12 \% & \$ 300,000 & 0.80 \
\hline & & \$ 600,000 & \
\hline
\end{array}$The portfolio's beta is:
A) 0.95.
B) 1.15.
C) 1.00.
D) None of the above

Quizplus · Accepted Answer

The portfolio's beta is a weighted average of the individual betas, with the weights being the proportions of the portfolio invested in each stock. In this case, the portfolio's beta is:(0.25 * 1.20) + (0.25 * 1.00) + (0.50 * 0.80) = 0.95

Assume a Portfolio Is Made Up of Three Stocks The Portfolio's Beta Is: A) 0

Assume a Portfolio Is Made Up of Three Stocks The Portfolio's Beta Is:
A) 0