You are considering a portfolio of three stocks with 30% of your money invested in company X, 45% of your money invested in company Y, and 25% of your money invested in company Z. If the betas for each stock are 1.22 for company X, 1.46 for company Y, and 1.03 for company Z, what is the portfolio beta?
A) 1.24
B) 1.00
C) 1.28
D) 1.33

Question

Quizplus · Accepted Answer

To find the portfolio beta, we need to calculate the weighted average of the individual betas, using the percentage of money invested in each stock as weights. 
Portfolio beta = (0.3 x 1.22) + (0.45 x 1.46) + (0.25 x 1.03) 
Portfolio beta = 0.366 + 0.657 + 0.258 
Portfolio beta = 1.281 
Therefore, the closest option to our calculation is C, 1.28.

You Are Considering a Portfolio of Three Stocks with 30