You own 15007 of Human Genome stock that has an assumed beta

You own $15,007 of Human Genome stock that has an assumed beta of 3.70. You also own $12,215 of Frozen Food Express (assumed beta = 2.53) and $7,678 of Molecular Devices (assumed beta = 0.77).

Solution

Beta of a portfolio is weighted average beta of the constituents of portfolio.

Total Investment = $15007 + $12215 + 7678 = 34,900

Weight of HG stock = 15007/34900 = 43%

Weight of FFE stock = 12215/34900 = 35%

Weight of MD stock = 7678/34900 = 22%

Portfolio Beta = W1 * Beta1 + W2 * Beta2 + ............................ + Wn * Beta_n

Portfolio Beta = (43% * 3.70) + (35% * 2.53) + (22% * 0.77) = 1.591 + 0.886 + 0.169 = 2.65 ---> Answer