Assume a portfolio is made up of four stocks: $\begin{array} { | l | l | l | l | }
\hline & \text { Expected } & \text { Investment } & \text { Beta } \
\hline & \text { Return } & & \
\hline \text { Stock A } & 18 \% & \$ 150,000 & 1.20 \
\hline \text { Stock B } & 14 \% & \$ 225,000 & 1.00 \
\hline \text { Stock C } & 12 \% & \$ 300,000 & 0.95 \
\hline \text { Stock D } & 20 \% & \$ 75,000 & 1.25 \
\hline & & \$ 750,000 & \
\hline
\end{array}$ The beta for the portfolio is:
A) 1.135.
B) 1.045.
C) 1.105.
D) None of the above

Question

Assume a portfolio is made up of four stocks: $\begin{array} { | l | l | l | l | } 
\hline & \text { Expected } & \text { Investment } & \text { Beta } \
\hline & \text { Return } & & \
\hline \text { Stock A } & 18 \% & \$ 150,000 & 1.20 \
\hline \text { Stock B } & 14 \% & \$ 225,000 & 1.00 \
\hline \text { Stock C } & 12 \% & \$ 300,000 & 0.95 \
\hline \text { Stock D } & 20 \% & \$ 75,000 & 1.25 \
\hline & & \$ 750,000 & \
\hline
\end{array}$ The beta for the portfolio is:
A) 1.135.
B) 1.045.
C) 1.105.
D) None of the above

Quizplus · Accepted Answer

The portfolio beta is calculated as the weighted average of the individual stock betas. The weights are the proportion of each stock's investment relative to the total portfolio investment. Calculating: $(150,000/750,000) \times 1.20 + (225,000/750,000) \times 1.00 + (300,000/750,000) \times 0.95 + (75,000/750,000) \times 1.25 = 1.045$.

Assume a Portfolio Is Made Up of Four Stocks The Beta for the Portfolio Is: A) 1

Assume a Portfolio Is Made Up of Four Stocks The Beta for the Portfolio Is:
A) 1