In: Finance
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
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 |