what is the beta of a three-stock portfolio including $2500 invested in stock A with a...

what is the beta of a three-stock portfolio including $2500 invested in stock A with a beta of .90, $4000 invested in stock B with a beta of 1.05, and $3500 invested in stock C with beta of 1.73?

Expert Solution

Beta of three stock portfolio			1.25

Working:

Beta of portfolio is calculated as follows:

Stock	Weight	Beta
	a	b		a*b
Stock A	0.25	0.90		0.23
Stock B	0.40	1.05		0.42
Stock C	0.35	1.73		0.61

Total				1.25

Thus, Beta of three stock portfolio is				1.25

Working:

Weight of individual asset is calculated as follows;

Stock	Investment	/	Total Investment		=	Weight

Stock A	$ 2,500		$ 10,000		=	0.25
Stock B	4,000		10,000		=	0.40
Stock C	3,500		10,000		=	0.35

Total	10,000					1.00

jeff jeffy answered 2 years ago

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