What is the beta of a three-stock portfolio including 25% of Stock A with a beta of .90, 40% Stock B with a be

Question

What is the beta of a three-stock portfolio including 25% of Stock A with a beta of .90, 40% Stock B with a beta of 1.05, and 35% Stock C with a beta of 1.73?

Answer 1

1.2715; Beta = (.25*.90)+(.4*1.05)+(.35*1.73). This means the portfolio exhibits 27.15% more movement (both up and down) than the market (Beta of 1).

Answer 2

RL has the right formula -- but the numbers add up to 1.2505.

The beta of a portfolio is equal to a market-weighted average of the betas of the assets in the portfolio.