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29 May, 10:44

Jim Angel holds a $200,000 portfolio consisting of the following stocks: Stock Investment Beta A $50,000 1.20 B $50,000 0.80 C $50,000 1.00 D $50,000 1.20 Total $200,000 What is the portfolio's beta? Do not round your intermediate calculations. a. 0.861 b. 0.809 c. 1.050 d. 1.239 e. 1.040

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  1. 29 May, 11:14
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    Option (c) is correct.

    Explanation:

    Jim Angel holds a $200,000 portfolio

    Weight of stock-A is as follows:

    = Investment of stock A : Total investment

    = $50,000 : $200,000

    = 0.25

    Therefore,

    Portfolio beta:

    = (0.25 * 1.20) + (0.25 * 0.80) + (0.25 * 1.00) + (0.25 * 1.20)

    = 0.3 + 0.2 + 0.25 + 0.3

    = 1.05

    Therefore, the portfolio's beta is 1.05.
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