Stock Portfolio Beta.

"Last year, everyone talked about the "Magnificent Seven," a group of technology industry leaders that drove gains in the S&P $500.$ A few of those stocks recently have faltered, and now, the focus is on the "Fab Four" the four members of the Magnificent Seven that continue to roar higher. These market winners are Nvidia, Meta Platforms,, Amazon, and Microsoft." Source: Motley Fool, April $4,2024.$

An investor has a portfolio that includes The Fab Four plus an S&P $500$ index fund. If the investor's stocks have the following values and betas, what is the beta of the portfolio? $($Calculate beta to $3$ decimal places.$)$

$\backslash$table$[[$Company $/$ Stock Symbol,Value,Beta$],[$Microsoft $/$ MSFT$,$$$50,000,0\mathrm{.}88],[$S&P $500$ Index Fund,$$200,000,1\mathrm{.}00],[$Meta Platforms $/$ META,$$80,000,1\mathrm{.}18],[$Amazon $/$ AMZN,$$30,000,1\mathrm{.}61],[$Nvidia $/$ NVDA,$$40,000,1\mathrm{.}74],[$Total Portfolio,$$400,000,]]$

a$.$ The beta is $1\mathrm{.}14$

b$.$ The beta is $0\mathrm{.}96$

c$.$ The beta is $1\mathrm{.}05$

d$.$ The beta is $1\mathrm{.}00$

e$.$ The beta is $1\mathrm{.}11$

$24.$ Beta and Required Rate of Return.

Refer to the betas of the stocks shown in the question above. Which of the following statements about these securities must be FALSE? $($Assume the market is in equilibrium.$)$

a$.$ The required rate of return of AMZN is lower than that of NVDA.

b$.$ If you invest equal amounts in MSFT$,$ META, AMZN and NVDA your $4-$stock portfolio will have a beta of $1\mathrm{.}35.$

c$.$ The required rate of return of MSFT is lower than that of an average stock.

d$.$ If you invest equal amounts in MSFT and META your $2-$stock portfolio will have a required rate of return lower than that of the market.

e$.$ Of the four stocks, MSFT has the lowest required rate of retum.

$11$