COMPANY PRICE # SHARES BETA Goodmonth $ 25.00 400 + 3.0 Icestone $250.00 200 – 1.0 Bridgerock $50.00 800 + 2.0 A. What is the beta of your portfolio? B. If you expect the market to earn 13% and the risk-free rate is 3%, what is the required return of the portfolio?
COMPANY PRICE # SHARES BETA
Goodmonth $ 25.00 400 + 3.0
Icestone $250.00 200 – 1.0
Bridgerock $50.00 800 + 2.0
A. What is the beta of your portfolio?
B. If you expect the market to earn 13% and the risk-free rate is 3%, what is the required return of the portfolio?
For calculating portfolio beta we need to multiply the individual beta with the weight of individual investment.
And to calculate the Required return of the portfolio we can take help of CAPM Model.
As per capital asset pricing model required return can be calculated using the formula mention below.
Required Return = Return Risk Free + (Return Market - Return risk free) x Beta of portfolio.
A- Calculation of Portfolio Beta
| Company | Price | Shares | Market Value | Weight | Beta | Weight x Beta |
| Goodmonth | 25 | 400 | 10000 | 0.1 | 3 | 0.30 |
| Icestone | 250 | 200 | 50000 | 0.5 | -1 | -0.50 |
| Bridgerock | 50 | 800 | 40000 | 0.4 | 2 | 0.80 |
| 100000 | 0.60 |
Herein Weight is calculated by dividing individual market value from Total Market value which is 100000
Hence Portfolio beta is 0.60
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