Question

You have a $50,000 portfolio consisting of intel, ge, and con edison. you put $20,000 in intel, $12,000 in ge, and the rest in con edison. intel, ge, and con edison have betas of 1.3, 1, and .8, respectively. what is your portfolio beta? question 24 options:

Answer 1

The calculation of portfolio beta is done by simply multiplying the percentage of each portfolio with each beta and summing up all the products afterwards.

For intel:
     = ($20,000/$50,000)(1.3) = 0.52

For GE:
    = ($12,000/$50,000)(1) = 0.24

For Con Edison:
   Portfolio of Con Edison = $50,000 - ($20,000 + $12,000) = $18,000
   = ($18,000/$50,000)(0.8) = 0.288

The portfolio beta is:
   PB = 0.52 + 0.24 + 0.288 = 1.048

ANSWER: 1.048