3.Troy has a 2-stock portfolio with a total value of $100,000.$37,500 is invested inStock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of1.42.What is his portfolio’s beta?

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1.02K viewsOctober 27, 2016

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Darshita 6.14K September 12, 2016 0 Comments

Troy has a 2-stock portfolio with a total value of $100,000.$37,500 is invested inStock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of1.42.What is his portfolio’s beta?

1 Answer

score 0 · Answer 1 · 2016-09-12T05:06:26+00:00

Answer:

Portfolio weight of Stock A

= $37,500/$100,000

= 0.375

Portfolio weight of Stock B

= ($100,000 – $37,500)/ $100,000

= 0.625

Portfolio beta of Stock A

= 0.375 x 0.75

= 0.281

Portfolio beta of Stock B

= 0.625 x 1.42 = 0.887

Troy’s portfolio beta

= 0.281 + 0.887

=1.174

1 Answer

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