Calculate the beta of john portfolio

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Question - John Mattock is considering constructing a portfolio of two assets - Thermal Ltd shares and Kinetic Ltd shares. He wants to invest $5,250 in Thermal Ltd shares and $9,750 in Kinetic Ltd shares.

Due to uncertainty facing the investment environment in 2022, John conducts some research and decides in 2022 there would be a 35% possibility of recession, a 15% possibility of growth, and a 50% possibility of economic stability. John then conducts more analysis and concludes that under these states Thermal Ltd and Kinetic Ltd shares would provide the following returns:

State

Thermal Ltd Return

Kinetic Ltd Return

Growth

35%

20%

Stable

10%

15%

Recession

-22%

7%

Required -

A. Calculate the expected return of John's portfolio consisting of Thermal Ltd and Kinetic Ltd shares.

B. If Thermal Ltd beta is expected to be 0.75 and Kinetic Ltd beta is expected to be 1.25, calculate the beta of John's portfolio consisting of Thermal Ltd and Kinetic Ltd shares.

Reference no: EM133076697

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