Question

If you invest 50 percent of your funds in a stock with beta=1.5, 30 percent in a stock with beta=0.9 and 20 percent in a stock with beta=0.3, your portfolio beta will be

Answer 1

1.08

Step-by-step explanation:

The computation of the portfolio beta is shown below:

Portfolio beta is

= Invested stock percentage × beta of the stock + Invested stock percentage × beta of the stock + Invested stock percentage × beta of the stock

= 0.50 × 1.50 + 0.30 × 0.90 + 0.20 × 0.30

= 1.08

We simply applied the above formula so that the portfolio beta could come and the same is to be considered