Ask Question
18 April, 20:47

Tom O'Brien has a 2-stock portfolio with a total value of $100,000. $47,500 is invested in Stock A with a beta of 0.75 and the remainder is invested in Stock B with a beta of 1.42. What is his portfolio's beta? Do not round your intermediate calculations. Round your final answer to 2 decimal places.

+1
Answers (1)
  1. 18 April, 23:33
    0
    The portfolio beta is 1.10

    Explanation:

    The portfolio beta is the systematic riskiness of the portfolio. The portfolio beta is the weighted average of the individual stock's betas that comprises the portfolio. For a two stock portfolio, the portfolio beta can be calculated as,

    Portfolio beta = wA * βA + wB * βB

    Where,

    wAand wB represents the prportion of total investments in stocks A & B respectively and βA & βB represents the betas of the stocks.

    Portfolio beta = 47500 / 100000 * 0.75 + 52500 / 100000 * 1.42

    Portfolio beta = 1.10175 rounded off to 1.10
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Tom O'Brien has a 2-stock portfolio with a total value of $100,000. $47,500 is invested in Stock A with a beta of 0.75 and the remainder is ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers