Question

1. You have a stock portfolio that consists of the following positions (price and beta as of 12:34 PM on 10/21/2019):
		Shares	Price	Beta
	Amazon	25	1782.52	1.63
	Apple	90	240.38	1.10
	Tesla	85	253.26	0.32
	Costco	75	301.62	0.93
	Disney	50	130.32	0.72
	(a) What is the portfolio beta? [Hint: You will need to compute the weights for each stock.]
	(b) If the market return is expected to be 2.5% and the risk-free rate is 1%,
	then what is the required rate of return on the portfolio?

Answer 1

	Shares	Price	Beta	Value of Investment	Weights
Amazon	25	1782.52	1.63	44563.00	38.13%
Apple	90	240.38	1.1	21634.20	18.51%
Tesla	85	253.26	0.32	21527.10	18.42%
Costco	75	301.62	0.93	22621.50	19.36%
Disney	50	130.32	0.72	6516.00	5.58%
			Total	116861.80
			Weighted Beta	1.10

a: Portfolio Beta = 1.1

b: Required rate of return = Rf+ Beta*(Rm-Rf)

= 1%+1.1*(2.5%-1%)

= 2.65%

Workings