Question

The following information is for the next three questions. Investor P has the following portfolio:

Stock	Amount	Return	Beta
A	10,000	10%	1.2
B	30,000	12%	0.8
C	20,000	15%	1.4
D	40,000	20%	2.0

01 - What are the weights of these four stocks in the portfolio?

	A.	w1= 20%, w2= 30% w3 = 20% w4= 10%
	B.	w1= 10%, w2= 40% w3 = 20% w4= 10%
	C.	w1= 10%, w2= 30% w3 = 20% w4= 40%
	D.	w1= 10%, w2= 30% w3 = 5%   w4= 25%

02 - What is the expected return of the portfolio?

	A.	15.6%.
	B.	12.8%
	C.	18.6%
	D.	11.2%

03 - What is the Beta of the portfolio?

	A.	1.6
	B.	2.3
	C.	1.1
	D.	0.95
	E.	1.44

Answer 1

Solution :

a. The weights of the four Stocks in the portfolio are Option C. w₁= 10%, w₂= 30% w₃ = 20% w₄= 40%

b. The Expected return of the portfolio is Option A = 15.6 %

c. The Beta of the portfolio is Option D = 1.44

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.