PORTFOLIO BETA An individual has $45,000 invested in a stock with a beta of 0.8 and...

PORTFOLIO BETA

An individual has $45,000 invested in a stock with a beta of 0.8 and another $30,000 invested in a stock with a beta of 2.5. If these are the only two investments in her portfolio, what is her portfolio's beta? Round your answer to two decimal places.

Expert Solution

Portfolio Beta	1.480

Working:

# 1: Calculation of weight of security:

Stock A	$ 45,000
Stock B	$ 30,000

Total	$ 75,000

Weight of:
Stock A	$ 45,000	/	$ 75,000	=	0.6
Stock B	$ 30,000	/	$ 75,000	=	0.4

# 2:Calculation of beta of portfolio:

	Weight	Beta
	a	b	a*b
Stock A	0.6	0.8	0.480
Stock B	0.4	2.5	1.000

Total			1.480

So, beta of portfolio is		1.480

jeff jeffy answered 10 months ago

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