Portfolio Beta Your investment club has only two stocks in its portfolio; $25,000 is invested in a stock with a beta of 0.4, and $75,000 is invested in a stock with a beta of 2.3. What is the portfolio\'s beta? Round your answer to two decimal places.
Solution
Portfolio Value = $100,000
Investment in first Stock= $25,000
Investment second Stock= $75,000
Weight of first Stock: $25,000 / $100,000 = 0.25
Weight of second Stock: $75,000 / $100,000 = 0.75
Beta of first Stock= 0.4
Beta of second Stock= 2.3
Beta (portfolio) = [Weight (Stock A) X Beta (Stock A)] + [Weight (Stock B) X Beta (Stock B)]
=[0.25 x 0.4]+ [0.75 x 2.3]
=0.1+1.725=1.83
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Portfolio Beta Your investment club has only two stocks in its portfol.docx
1. Portfolio Beta Your investment club has only two stocks in its portfolio; $25,000 is invested in a
stock with a beta of 0.4, and $75,000 is invested in a stock with a beta of 2.3. What is the
portfolio's beta? Round your answer to two decimal places.
Solution
Portfolio Value = $100,000
Investment in first Stock= $25,000
Investment second Stock= $75,000
Weight of first Stock: $25,000 / $100,000 = 0.25
Weight of second Stock: $75,000 / $100,000 = 0.75
Beta of first Stock= 0.4
Beta of second Stock= 2.3
Beta (portfolio) = [Weight (Stock A) X Beta (Stock A)] + [Weight (Stock B) X Beta (Stock B)]
=[0.25 x 0.4]+ [0.75 x 2.3]
=0.1+1.725=1.83
![Portfolio Beta Your investment club has only two stocks in its portfolio; $25,000 is invested in a
stock with a beta of 0.4, and $75,000 is invested in a stock with a beta of 2.3. What is the
portfolio's beta? Round your answer to two decimal places.
Solution
Portfolio Value = $100,000
Investment in first Stock= $25,000
Investment second Stock= $75,000
Weight of first Stock: $25,000 / $100,000 = 0.25
Weight of second Stock: $75,000 / $100,000 = 0.75
Beta of first Stock= 0.4
Beta of second Stock= 2.3
Beta (portfolio) = [Weight (Stock A) X Beta (Stock A)] + [Weight (Stock B) X Beta (Stock B)]
=[0.25 x 0.4]+ [0.75 x 2.3]
=0.1+1.725=1.83](https://image.slidesharecdn.com/portfoliobetayourinvestmentclubhasonlytwostocksinitsportfol-230129060352-d55b8e58/85/Portfolio-Beta-Your-investment-club-has-only-two-stocks-in-its-portfol-docx-1-320.jpg)
