Question

g An individual has $20,000 invested in a stock with a beta of 0.8 and another $50,000 invested in a stock with a beta of 1.6. If these are the only two investments in her portfolio, what is her portfolio's beta

Answer 1

Answer:

1.37

Explanation:

The computation of the portfolio beta is shown below:

Value                   Weight             Beta       Weighted Beta

of Investment    of Investment    (weight of value × beta)

$20,000              0.2857           0.8       0.22856

$50,000               0.7143            1.6         1.14288

Total = $70,000     1                                  1.37

We simply multiplied the weight of investment with the beta of each investment so that the portfolio beta could come