im Angel holds a $200,000 portfolio consisting of the following stocks: Stock Investment Beta A $50,000 0.95 B 50,000 0.8 C 50,000 1 D 50,000 1.2 Total $200,000 What is the portfolio's beta

Answer: 0.9875

Explanation:

Portfolio beta is the measure of the volatility of a portfolio or security when it is compared to the market.

From the question, we are informed that an investment of $200,000 was made for four stock types. This means each stock's investment was: ($200,000/4) = $50,000. Therefore a weightage of (100% : 4) = 25% will be assigned to each.

The portfolio beta will now be:

= (25% * 0.95) + (25% * 0.8) + (25% * 1) + (25% * 1.2)

= (0.25 * 0.95) + (0.25 * 0.8) + (0.25 * 1) + (0.25 * 1.2)

= 0.2375 + 0.2 + 0.25 + 0.3

= 0.9875

The portfolio's beta is 0.9875