Shirley Paul's two-stock portfolio is valued at $100,000. She has $37,500 invested in Stock A, which has a beta of 0.75, and the remainder in Stock B, with a beta of 1.42. What is the beta of her portfolio?

 To calculate the beta of Shirley Paul's two-stock portfolio, we need to find the weighted average of the betas of the two stocks, each weight being the proportion of the stock's value in the total portfolio. Here's how you can do it:

1. First, calculate the value of Stock B in the portfolio: Since the total portfolio value is $100,000 and Shirley has $37,500 invested in Stock A, we can find the value invested in Stock B by subtracting the amount in Stock A from the total portfolio. Value of Stock B = Total portfolio value - Value of Stock A Value of Stock B = $100,000 - $37,500 Value of Stock B = $62,500

2. Next, calculate the proportions of each stock in the portfolio: Proportion of Stock A = Value of Stock A / Total portfolio value Proportion of Stock A = $37,500 / $100,000 Proportion of Stock A = 0.375

Proportion of Stock B = Value of Stock B / Total portfolio value Proportion of Stock B = $62,500 / $100,000 Proportion of Stock B = 0.625

3. Then, multiply each stock's beta by its respective proportion: Weighted beta of Stock A = Beta of Stock A * Proportion of Stock A Weighted beta of Stock A = 0.75 * 0.375 Weighted beta of Stock A = 0.28125

Weighted beta of Stock B = Beta of Stock B * Proportion of Stock B Weighted beta of Stock B = 1.42 * 0.625 Weighted beta of Stock B = 0.8875

4. Finally, sum these weighted betas to get the beta of the entire portfolio: Beta of Portfolio = Weighted beta of Stock A + Weighted beta of Stock B Beta of Portfolio = 0.28125 + 0.8875 Beta of Portfolio = 1.16875

So, the beta of Shirley Paul's portfolio would be approximately 1.17.