Question

In: Finance

Suppose you are the money manager of a $200,000 investment fund. The fund consists of four...

Suppose you are the money manager of a $200,000 investment fund. The fund consists of four stocks with the following investments and betas:

Stock

Investment

Beta

A

$ 40,000

1.20

B

$ 50,000

0.80

C

$ 60,000

1.00

D

$ 50,000

1.20

What is the portfolio’s beta?

Select one:

a. I do not have enough information

b. 1.00

c. 1.05

d. 1.04

Solutions

Expert Solution

Ans d. 1.04

Stock INVESTMENT (i) Beta (ii) Investment* Beta (i)* (ii)
A                       40,000                      1.20                                         48,000.00
B                       50,000                      0.80                                         40,000.00
C                       60,000                      1.00                                         60,000.00
D                       50,000                      1.20                                         60,000.00
Total                   2,00,000                                            2,08,000
AVERAGE BETA = (INVESTMENT * BETA) / TOTAL INVESMENT
208000 / 200000
1.04

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