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21 November, 06:38

You have a portfolio that is invested 14 percent in Stock R, 50 percent in Stock S, and the remainder in Stock T. The beta of Stock R is. 81, and the beta of Stock S is 1.36. The beta of your portfolio is 1.30. What is the beta of the Stock T

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  1. 21 November, 08:59
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    1.41 Approx

    Explanation:

    The computation of the beta for the stock T is shown below:

    Beta of portfolio = Respective betas * Respective investment weights

    1.30 = (0.14 * 0.81) + (0.5 * 1.36) + (0.36 * beta of the Stock T)

    1.30 = 0.7934 + (0.36 * beta of the Stock T)

    beta of the Stock T = (1.3 - 0.7934) : 0.36

    = 1.41 Approx

    We simply multiplied the beta of each stock with its investment weights order to calculate the beta of the stock T as portfolio beta is given
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