To calculate the beta of a portfolio ($\beta_p$), we use the weighted average of the betas of the individual stocks based on their portfolio weights. The formula is:

$\beta_p = w_A \cdot \beta_A + w_B \cdot \beta_B + w_C \cdot \beta_C$

Given Data:

• $w_A = 0.14$, $w_B = 0.50$, $w_C = 0.36$
• $\beta_A = 0.81$, $\beta_B = 1.36$, $\beta_C = 1.65$

Calculation:

$\beta_p = (0.14 \cdot 0.81) + (0.50 \cdot 1.36) + (0.36 \cdot 1.65)$

Step-by-step:

1. $0.14 \cdot 0.81 = 0.1134$
2. $0.50 \cdot 1.36 = 0.68$
3. $0.36 \cdot 1.65 = 0.594$

Add these together: $\beta_p = 0.1134 + 0.68 + 0.594 = 1.3874$

Final Answer:

The beta of the portfolio is approximately 1.39.

Correct Answer: 1.39

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Would you like additional clarification or a breakdown of beta concepts? Here are five related questions to explore:

1. How does beta affect the risk-return profile of a portfolio?
2. How would the portfolio beta change if Stock A's weight increased to 20%?
3. What does it mean if a portfolio beta is greater than 1?
4. How can beta be used to measure the impact of market changes on a portfolio?
5. What is the beta of an equally weighted portfolio with the same stocks?

Tip: Beta measures systematic risk, or how much a stock or portfolio moves relative to the market. A beta of 1.0 means the portfolio is as volatile as the market.