Question

In: Finance

You are managing a mutual fund with the following stocks: Stock Investment Beta A $1,951 0.7...

You are managing a mutual fund with the following stocks:

Stock

Investment

Beta

A

$1,951

0.7

B

$2,625

0.3

What is the beta for this mutual fund (i.e. what is the portfolio beta)?

Solutions

Expert Solution

Portfolio beta is weighted average of the beta of contituents.

Portfolio beta = w1 * Beta1 + w2 * Beta2

w1 = $1951/($1951 + $2625) = 0.4264

w2 = $2625/($1951 + $2625) = 0.5736

Portfolio beta = (0.4264 * 0.7) + (0.5736 * 0.3) = 0.30+0.17 = 0.47

jeff jeffy answered 2 years ago
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