Question

Seved You hold the positions in the following table. What is the beta of your portfolio? TechNo Comp. Delivery Corp. Computer Corp. Food Corp. Price $ 15.25 $105.00 $ 35.40 $18.75 Shares Beta 2000 4.0 500 1.4 300 0.9 200 -0.7 Multiple Choice O < Prev 7 of 10 Hit Score an Search

Answer 1

Portfolio beta is approx 2.07. In the answer choices 2.08 is given, while other options of answers are missing. So, we can take option (b) i.e. 2.08 to be the correct answer.

Beta of the portfolio is the weighted beta of the shares given. For calculating the weighted beta, first we will find the total value of shares by multiplying the share price by number of shares. Then we will calculate the percentage or weight of each share to the total value of the portfolio. And then, we will multiply the beta with the weights or percentages. Finally we woll add the weighted values to find the portfolio beta. Whole process is given below in tabular format:

Share	price	Number of shares	Value	Share pf portfolio	Beta	Weighted beta
Techno. Comp	$15.25	2000	30500	30500 / 97370 = 0.31	4	1.24
Delivery corp	$105	500	52500	52500 / 97370 = 0.54	1.4	0.756
Computer corp	$35.4	300	10620	10620 / 97370 = 0.11	0.9	0.099
Food corp	$18.75	200	3750	3750 / 97370 = 0.04	-0.7	-0.028
			97370			2.07

So, weighted beta is 2.07