Question

1. The ?beta of a firm’s stock indicates the degree to which changes in a firm’s stock price track, or follow, changes in the stock market overall. A ?beta of 1.0 indicates that, on average, a firm’s stock price rises or falls the same percentage as the market overall (for example, if the market overall increases 1%, the firm’s stock price increases 1%, on average). A ?beta of 2.0 indicates that, on average, a firm’s stock price rises or falls at twice the percentage of the market overall (for example, if the market overall decreases 1%, the firm’s stock price decreases 2%, on average). Portfolios, or groups, of stocks also have ?betas, which can be interpreted as the market-related volatility, or market risk, of a portfolio, or group, of stocks. The ?beta of a stock portfolio is the weighted mean of the ?betas of the individual stocks, where the weights are based on the current market values of the stocks (current market value = current stock price % number of shares in the portfolio). Consider the following portfolio of three Seattle-area stocks (Price and ?beta values from Yahoo! Finance): Company | Price (4 September 2019) | # Shares | ?beta Amazon.com | $1,800.62 | 200 | 1.62 Microsoft | $137.63 | 2,000 | 0.97 Starbucks | $96.11 | 2,500 | 0.57 Calculate the ?beta of the portfolio on 4 September 2019.

          1. The ?beta of a firm’s stock indicates the degree to which changes in a firm’s stock price track, or follow, changes in the stock market overall. A ?beta of 1.0 indicates that, on average, a firm’s stock price rises or falls the same percentage as the market overall (for example, if the market overall increases 1%, the firm’s stock price increases 1%, on average). A ?beta of 2.0 indicates that, on average, a firm’s stock price rises or falls at twice the percentage of the market overall (for example, if the market overall decreases 1%, the firm’s stock price decreases 2%, on average). Portfolios, or groups, of stocks also have ?betas, which can be interpreted as the market-related volatility, or market risk, of a portfolio, or group, of stocks. The ?beta of a stock portfolio is the weighted mean of the ?betas of the individual stocks, where the weights are based on the current market values of the stocks (current market value = current stock price % number of shares in the portfolio). Consider the following portfolio of three Seattle-area stocks (Price and ?beta values from Yahoo! Finance):

Company | Price (4 September 2019) | # Shares | ?beta
Amazon.com | $1,800.62 | 200 | 1.62
Microsoft | $137.63 | 2,000 | 0.97
Starbucks | $96.11 | 2,500 | 0.57

Calculate the ?beta of the portfolio on 4 September 2019.

1. The ?beta of a firm’s stock indicates the degree to which changes in a firm’s stock price track, or follow, changes in the stock market overall. A ?beta of 1.0 indicates that, on average, a firm’s stock price rises or falls the same percentage as the market overall (for example, if the market overall increases 1%, the firm’s stock price increases 1%, on average). A ?beta of 2.0 indicates that, on average, a firm’s stock price rises or falls at twice the percentage of the market overall (for example, if the market overall decreases 1%, the firm’s stock price decreases 2%, on average). Portfolios, or groups, of stocks also have ?betas, which can be interpreted as the market-related volatility, or market risk, of a portfolio, or group, of stocks. The ?beta of a stock portfolio is the weighted mean of the ?betas of the individual stocks, where the weights are based on the current market values of the stocks (current market value = current stock price % number of shares in the portfolio). Consider the following portfolio of three Seattle-area stocks (Price and ?beta values from Yahoo! Finance):

Company | Price (4 September 2019) | # Shares | ?beta
Amazon.com | 1,800.62 | 200 | 1.62
Microsoft |137.63 | 2,000 | 0.97
Starbucks | 96.11 | 2,500 | 0.57

Calculate the ?beta of the portfolio on 4 September 2019.

Added by Kari M.

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