CS Executive · Corporate Accounting and Financial Management · Security Analysis
A portfolio has Rs 60,000 invested in Share A with beta 1.2 and Rs 40,000 in Share B with beta 0.8. The portfolio beta is:
The portfolio beta is 1.04. Portfolio beta is the weighted average of individual betas using investment proportions: 60% times 1.2 gives 0.72 and 40% times 0.8 gives 0.32, totalling 1.04. A simple average of 1.00 ignores the weights.
- A1.00
- B1.04Correct
- C1.10
- D0.96
Explanation
Weights are 0.6 and 0.4. Portfolio beta = 0.6 x 1.2 + 0.4 x 0.8 = 0.72 + 0.32 = 1.04. Option A is the simple average, which ignores the unequal weights.
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