You own $16,416 of Human Genome stock that has an assumed beta of 3.51. You also own $13,824 of Frozen Food Express (assumed beta = 1.63) and $12,960 of Molecular Devices (assumed beta = 0.88). What is the beta of your portfolio?

The portfolio beta is 2.1194.

Explanation:

The portfolio beta is the measure of portfolio's systematic risk. The portfolio beta is the weighted average of the individual stock betas that form up the portfolio. The formula for portfolio beta is,

Portfolio beta = wA * Beta of A + wB * Beta of B + ... + wN * Beta of N

Where,

w is the weightage of stocks in portfolio

Total investment in portfolio = 16416 + 13824 + 12960 = $43200

Portfolio beta = 16416 / 43200 * 3.51 + 13824 / 43200 * 1.63 + 12960 / 43200 * 0.88

Portfolio beta = 2.1194