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12 March, 04:27

You own a stock portfolio invested 30 percent in stock q, 25 percent in stock r, 35 percent in stock s, and 10 percent in stock t. the betas for these four stocks are. 76, 1.14, 1.15, and 1.32, respectively. what is the portfolio beta?

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  1. 12 March, 04:50
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    1.05

    Explanation:

    Simply multiply the percentage of a particular stock holding with its respective beta factor and likewise the value of the other stocks to calculate the weighted average beta factor of the portfolio.

    Mathematically:

    Portfolio Beta = (P1 * B1) + (P2 * B2) + (P3 * B3) + (P4 * B4) ... + (Pn * Bn)

    Here

    P is the percentage holding of a particular stock and is 30, 25, 35 and 20 percent of stock q, r, s and t respectively.

    B is the beta factors of the stock which is 0.76, 1.14, 1.15 and 1.32 of the stock q, r, s and t respectively.

    By putting the values, we have:

    Portfolio Beta = (30% * 0.76) + (25% * 1.14) + (35% * 1.15) + (10% * 1.32)

    = 1.0475 which is approximately 1.05.
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