Question

In: Finance

Your portfolio contains $4,815 worth of PG and $4,397 worth of HD stocks. What is the...

Your portfolio contains $4,815 worth of PG and $4,397 worth of HD stocks. What is the beta of your portfolio, if PG's beta is 0.8 and HD's beta is 1.5%? Assume that the CAPM holds.

Provide your answer rounded to two decimals.

Solutions

Expert Solution

Beta of portfolio is the sum of weighted beta.
Stock Weight Beta Weighted beta
a b c=a*b
PG              0.52 0.8           0.42
HD              0.48 1.5           0.72
Total           1.13
So, beta of portfolio is 1.13
Working:
Stock
PG $       4,815
HD $       4,397
Total $       9,212
So, weight of:
PG $       4,815 / $    9,212 =           0.52
HD $       4,397 / $    9,212 =           0.48
Total           1.00

jeff jeffy answered 2 years ago
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