
You have a portfolio that is invested 14 percent in Stock A, 50 percent in Stock B, and 36 percent in Stock C. The betas of the stocks are .81, 1.36, and 1.65, respectively. What is the beta of the portfolio?

Multiple Choice

1.56

1.39

1.33

1.27

1.13

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.

You have a portfolio that is invested 14 percent in Stock A, 50 percent in Stock B, and 36 percent in Stock C. The betas of the stocks are .81, 1.36, and 1.65, respectively. What is the beta of the portfolio?

Multiple Choice:
1.56
1.39
1.33
1.27
1.13

Learn how to calculate the beta of a portfolio with investments in Stock A (14%), Stock B (50%), and Stock C (36%). Explore systematic risk and weighted averages with a step-by-step solution using beta values of 0.81, 1.36, and 1.65. Ideal for undergraduate finance students.

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