You own a stock portfolio invested 25 percent in Stock Q, 20 percent in Stock R, 40 percent in Stock S, and 15 percent in Stock T. The betas for these four stocks are 0.82, 1.21, 1.11, and 1.12, respectively. What is the portfolio beta?Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.Blank.xlsx

Question

BlackTom AI · Accepted Answer

Begin by understanding that portfolio beta is the weighted average of the individual betas: sum(weight_i × beta_i).

Compute each product:
- Q: 0.25 × 0.82 = 0.205
- R: 0.20 × 1.21 = 0.242
- S: 0.40 × 1.11 = 0.444
- T: 0.15 × 1.12 = 0.168

Next, add these contributions together:
0.205 + 0.242 = 0.447
0.447 + 0.444 = 0.891
0.891 + 0.168 = 1.059

Finally, round to two decimal places as requested: 1.06.

Note: If you see a different value in an answer field (for example 1.04), re-check the individual multiplications and the addition step, and ensure you used the exact weights (25%, 20%, 40%, 15%) and the given betas (0.82, 1.21, 1.11, 1.12) without rounding intermediate results prematurely.

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