Question

. Using the information below, find the expected return and beta of the portfolio.

Stock	Beta	Return	Investment
Stock A	0.78	7.55%	$ 9,500
Stock B	1.10	9.87%	$20,000
Stock C	2.45	15.66%	$ 5,000
Stock D	1.00	10.22%	$15,500

Answer 1

The return of a portfolio is the weighted average return of the securities which constitute the porfolio

Stock	Investment	Weight	Expected Return (%)	Weight*Expected Return
A	9,500	0.19	7.55	1.43
B	20,000	0.40	9.87	3.95
C	5,000	0.10	15.66	1.57
D	15,500	0.31	10.22	3.17

Portfolio Return = 1.43+3.95+1.57+3.17

= 10.12%

Weight = Investment/Total  Investment

The beta of a portfolio is the weighted average beta of the securities which constitute the porfolio

Stock	Weight	Beta	Weight*Beta
A	0.19	0.78	0.15
B	0.40	1.10	0.44
C	0.10	2.45	0.25
D	0.31	1.00	0.31

Portfolio Beta = .15+.44+.25+.31

= 1.14