Your investment club has only two stocks in its portfolio. $50,000 is invested in a stock with a beta of 0.5, and $75,000 is invested in a stock with a beta of 1.6. What is the portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places. 

The portfolio's beta is the weighted average of the individual stock betas, based on the proportion of the total investment in each stock. Here's how to calculate it:

1. **Total investment in the portfolio**:
   \[
   \text{Total investment} = 50,000 + 75,000 = 125,000
   \]

2. **Proportion of the investment in each stock**:
   - For the stock with a beta of 0.5:
     \[
     \text{Proportion} = \frac{50,000}{125,000} = 0.4
     \]
   - For the stock with a beta of 1.6:
     \[
     \text{Proportion} = \frac{75,000}{125,000} = 0.6
     \]

3. **Calculate the portfolio beta** by multiplying each stock's beta by its respective proportion and summing the results:
   \[
   \text{Portfolio beta} = (0.4 \times 0.5) + (0.6 \times 1.6)
   \]

Let's calculate this step-by-step.

\[
0.4 \times 0.5 = 0.2
\]
\[
0.6 \times 1.6 = 0.96
\]

4. **Sum the contributions**:
   \[
   \text{Portfolio beta} = 0.2 + 0.96 = 1.16
   \]

Thus, the portfolio's beta is **1.16**.

---

Would you like further details or have any questions?

Here are 5 related questions you might find interesting:
1. How does the portfolio beta affect expected returns compared to the market?
2. What is the significance of a beta less than 1, equal to 1, or greater than 1?
3. How would adding a risk-free asset to the portfolio affect its beta?
4. What is the relationship between portfolio beta and market risk?
5. How does diversification impact portfolio beta?

**Tip**: A portfolio beta of 1 means the portfolio is expected to move with the market. A beta greater than 1 implies more volatility than the market, while a beta less than 1 implies less volatility.

Your investment club has only two stocks in its portfolio. $50,000 is invested in a stock with a beta of 0.5, and $75,000 is invested in a stock with a beta of 1.6. What is the portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places.

Learn how to calculate the beta of a portfolio with two stocks, using weighted averages. In this example, $50,000 is invested in a stock with a beta of 0.5 and $75,000 in a stock with a beta of 1.6. Follow this step-by-step guide to get the final portfolio beta of 1.16, explained with detailed calculations.

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