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Tom O'Brien has a 2-stock portfolio with a total value of $100,000. $75,000 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?a.1.12
b.0.86
c.0.92
d.0.99
e.0.81

Answer :

Answer:

Beta of portfolio will be 0.92

So option (C) will be correct answer

Explanation:

We have given total  investment of stock = $100000

Investment of stock A = $75000

Investment of stock B = $100000 - $75000 = $25000

Wight of stock A [tex]=\frac{75000}{100000}=0.75[/tex]

Weight of stock B [tex]=\frac{25000}{100000}=0.25[/tex]

Beta of stock A = 0.75

And beta of stock B = 1.42

We have to fond the beta of portfolio

So beta of portfolio = weight of stock A × beta of stock A + weight of stock B × beta of stock B = 0.75×0.75 +0.25×1.42 = 0.92

So beta of portfolio will be 0.92

So option (C) will be correct answer

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