27.03.2023 - 17:31

You hold a portfolio with the following scenarios: Security Percent of Portfolio Beta Stock A 23% 1.50 Stock B 48% 1.32 Stock C 29% 1.87 Calculate beta for the portfolio.

You hold a portfolio with the following scenarios:

Security Percent of Portfolio Beta
Stock A 23% 1.50
Stock B 48% 1.32
Stock C 29% 1.87

Calculate beta for the portfolio.

Answers (1)
  • chuba
    April 1, 2023 в 14:27

    To calculate the beta of a portfolio, you need to take the weighted average of the betas of the individual securities in the portfolio.

    Using the information provided in the table, we can calculate the beta of the portfolio as follows:

    Beta of Portfolio = (Percentage of Stock A x Beta of Stock A) + (Percentage of Stock B x Beta of Stock B) + (Percentage of Stock C x Beta of Stock C)

    Beta of Portfolio = (0.23 x 1.50) + (0.48 x 1.32) + (0.29 x 1.87)

    Beta of Portfolio = 0.345 + 0.6336 + 0.5423

    Beta of Portfolio = 1.5209

    Therefore, the beta of the portfolio is 1.5209.

    This means that the portfolio is expected to be 1.5209 \times as volatile as the overall market. If the market were to increase by 1%, the portfolio would be expected to increase by 1.5209%. Similarly, if the market were to decrease by 1%, the portfolio would be expected to decrease by 1.5209%.

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