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4 September, 11:23

You have a $56,000 portfolio consisting of Intel, GE, and Con Edison. You put $22,400 in Intel, $14,400 in GE, and the rest in Con Edison. Intel, GE, and Con Edison have betas of 1.3, 1, and. 8, respectively. What is your portfolio beta?

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  1. 4 September, 11:51
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    1.05142

    Explanation:

    Given that,

    portfolio consisting of Intel, GE, and Con Edison = $56,000

    Amount put in Intel = $22,400

    Amount put in GE = $14,400

    Amount put in Con Edison = $19,200

    Beta for Intel = 1.3

    Beta for GE = 1

    Beta for Con Edison = 0.8

    Weight of investment of Intel:

    = Amount put in Intel : Total investment

    = $22,400 : $56,000

    = 0.4 or 40%

    Weight of investment of GE:

    = Amount put in GE : Total investment

    = $14,400 : $56,000

    = 0.2571 or 25.71%

    Weight of investment of Con Edison:

    = Amount put in Con Edison : Total investment

    = $19,200 : $56,000

    = 0.3429 or 34.29%

    Port folio beta:

    = Beta * Weight of investment

    = (1.3 * 40%) + (1 * 25.71%) + (0.8 * 34.29%)

    = 0.52 + 0.2571 + 0.27432

    = 1.05142
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