Question

You are considering a portfolio of three stocks with​ 30% of your money invested in company​ X, 45% of your money invested in company​ Y, and​ 25% of your money invested in company Z. If the betas for each stock are 1.22 for company​ X, 1.46 for company​ Y, and 1.03 for company​ Z, what is the portfolio​ beta?

Answer 1

1.2805

Step-by-step explanation:

Data provided in the question:

Company Money invested Beta Money Invested × Beta

X 30% = 0.3 1.22 0.366

Y 45% = 0.45 1.46 0.657

X 25% = 0.25 1.03 0.2575

Now,

The beta of the profile is given as:

Beta profile = ∑ (Money invested × Beta)

or

Beta profile = 0.366 + 0.657 + 0.2575

or

Beta profile = 1.2805