Assume a portfolio is worth $70,000, consisting of X, Y, and cash. Also assume you invested $35,000 in X, $14,000 in Y and the rest in cash, and that X and Y have betas of 1.45 and 0.80 respectively. Calculate the portfolio beta. (Provide numerical answer to 3 decimal places.)

0.885

Explanation:

Beta measures systemic risk. The higher beta is, the higher the systemic risk and the higher the compensation demanded for by investors

The portfolio's beta can be determined by adding together the weighted beta of each stock in the portfolio

weighed beta of a stock = percentage of the stock in the portfolio x beta of the stock

Percentage of x = $35,000 / 70,000 = 0.5 = 50%

Percentage of y = $14,000 / 70,000 = 0.2 = 20%

Percentage of cash = 100 - (50 + 20) = 30%

Cash usually have a beta of zero

portfolio beta = (0.5 x 1.45) + (0.2 x 0.8) + (0.3 x 0) =

0.725 + 0.16 + 0 = 0.885

0.725

0.16

typically a loft will include modern kitchen and bathrooms, this increases the price tag. lofts also have a good amount of open space, this requires more heating and electricity. lofts are also in older buildings, this means that maintaining the location increases the bill. keep in mind this is without talking about the high state and property taxes.

i hope this you! : )