5. Using your answers to Problems 4a and 4b, estimate your portfolios expected return if the security market line is estimated as E(Ri) = 5.2 + 8.4(i).

Beta of a portfolio is the weighted average Beta of the stock contained in it. Thus,

Problems 4a and 4b answer

1. Beta = (0.23 + 0.77 + 1.05 + 1.33) x 0.25 = 0.845 or 0.85

2. Beta = (0.23 x 20%) + (0.77 x 40%) + (1.05 x 15%) + (1.33 x 25%) = 0.844 or 0.84