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    Computing and Controlling the Portfolio Beta

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    Mrs. Ochede has 20,000 naira saved from work, she intends to invest in shares. Ochede's friend has approached you for assistance. The data provided is as follows,

    Company                           Beta

    A                                         0.8

    B                                         0.9

    C                                         1.08

    D                                         1.3

    a) calculate Beta of the portfolio of A,C, D if she invests 4,000 naira in each company .

    b) Amount to be invested in B to obtain weighted Beta of less than 1 after making investments in a above.

    © BrainMass Inc. brainmass.com September 27, 2022, 9:49 am ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/computing-controlling-portfolio-beta-623437

    SOLUTION This solution is FREE courtesy of BrainMass!

    Please see the attached Excel 97-2003 worksheet.

    Mrs. Ochede has 20,000 naira saved from work, she intends to invest in shares. Ochede's friend has approached you for assistance. The data provided is as follows,

    Company                           Beta

    A                                         0.8

    B                                         0.9

    C                                         1.08

    D                                         1.3

    a) calculate Beta of the portfolio of A,C, D if she invests 4,000 naira in each company .

    Company Investment % of Investment Beta Weighted Beta
    A 4,000.00 33.33% 0.8 0.26667
    C 4,000.00 33.33% 1.08 0.36000
    D 4,000.00 33.33% 1.3 0.43333
    Total 12,000.00 100.00% 1.06000

    The portfolio beta is 1.06

    b) Amount to be invested in B to obtain weighted Beta of less than 1 after making investments in a above.

    Company Investment % of Investment Beta Weighted Beta
    A 4,000.00 20.00% 0.8 0.16000
    B 8,000.00 40.00% 0.9 0.36000
    C 4,000.00 20.00% 1.08 0.21600
    D 4,000.00 20.00% 1.3 0.26000
    Total 20,000.00 100.00% 0.99600

    To weigh the portfolio down to below 1, she must invest the maximum available, or 8,000.00 in Company B

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com September 27, 2022, 9:49 am ad1c9bdddf>
    https://brainmass.com/business/beta-and-required-return-of-a-project/computing-controlling-portfolio-beta-623437

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