Question

Tom Skinner has $45,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.4. These are the only two investments in his portfolio. What is his portfolio's beta?

Answer 1

The porfolio beta is 1.13

Step-by-step explanation:

The computation of the portfolio beta is shown below:

= Weight × beta + weight × beta

= ($45,000 ÷ ($45,000 + $55,000) × 0.8 + ($55,000 ÷ ($45,000 + $55,000) × 1.4

= 0.45 × 0.8 + 0.55 × 1.4

= 1.13

Hence, the porfolio beta is 1.13

We simply applied the above formula so that the correct value could come

And, the same is to be considered