Assume a portfolio is made up of four stocks:
Expected
Investment
Beta
Return
Stock A
18%
$150,000
1.20
Stock B
14%
$225,000
1.00
Stock C
12%
$300,000
0.95
Stock D
20%
$ 75,000
1.25
$750,000
the beta for the portfolio is:
Answer:
Weights: A: 150/750 = .20; B: 225/750 = .30; C: 300/750 = .40; D 75/750 = .10
Wtd Avg = 1.20(.20) + 1.00(.30) + .95(.40) + 1.25(.10) = 1.045
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