P9-4 Portfolio Beta and Required Return You hold the positions in the table below.

A) What is the beta of your portfolio?

B) If you expect the market to earn 14 percent and the risk-free rate is 3.0 percent, what is the required return of the portfolio?

Price Shares Beta

Texas, Inc. $30.00 200 2.8

Dollar Earned Stores $20.00 600 2.2

Atomic, Inc $70.00 400 1.4

Big Truck Corp $40.00 100 -0.6

This problem can be solved two different and equivalent ways. Both ways require the weights of the stocks in the portfolio.

In one method, compute the required return for each stock and then use the weights to form the portfolio required return.

The other method uses the weights to compute the portfolio beta. This portfolio beta is used to compute the portfolio required return.