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If a portfolio holds three stocks in equal amounts, and the betas of the three stocks...

If a portfolio holds three stocks in equal amounts, and the betas of the three stocks are 0, 0.5, and 1.1, what is the beta of the portfolio?

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Expert Solution

We will be calculating the beta of the portfolio by weighted average beta of the portfolio-

All the stocks are held in the equal proportions so we will directly take out the average of all the stocks beta in order to find out the portfolio beta.

= (0+.5+1.1)/3

= (1.6)/3

= 5.3333

The beta of the portfolio is 5.33

jeff jeffy answered 2 years ago
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