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An individual has $10,000 invested in a stock with a beta of 0.3 and another $45,000 invested in a stock with a beta of 2.1. If these are the only two investments in her portfolio, what is her portfolio's beta

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Shahzaibfaraz

Answer:

Th portfolio beta = 1.77

Explanation:

The portfolio beta is equal to the weighted average of the individual stock betas. The weight of individual stock is ,

Weight of stock in a portfolio = Investment in stock / Total investment in portfolio

Let A be the stock with the beta 0.3.

Let B be the stock with beta 2.1.

Total investment in portfolio = 10000 + 45000 = 55000

Portfolio beta = 10/55 * 0.3 + 45/55 * 2.1  = 1.7727

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