Question

You own a stock portfolio invested 22 percent in Stock Q, 23 percent in Stock R, 42 percent in Stock S, and 13 percent in Stock T. The betas for these four stocks are .88, .94, 1.34, and 1.79, respectively. What is the portfolio beta

Answer 1

Answer: 1.20

Explanation:

The Portfolio beta will be a weighted average of the individual stock betas.

Portfolio beta = (22% * 0.88) + ( 23% * 0.94) + ( 42% * 1.34) + ( 13% * 1.79)

= 0.1936‬ + ‭0.2162‬ + ‭0.5628‬ + ‭0.2327‬

= ‭1.2053‬

= 1.20