You hold the following portfolio: Stock Investment Beta $150.000 1.40 $50,000 0.80 $100,000 1.00 1.20 $75,000...

Question

Question

You hold the following portfolio: Stock Investment Beta $150.000 1.40 $50,000 0.80 $100,000 1.00 1.20 $75,000 $375,000 Total

Answer 1

Answer #1

Ans C. -0.240

WHEN STOCK A IS TAKEN
Stock	INVESTMENT (i)	Beta (ii)	Investment* Beta (i)* (ii)
A	1,50,000	1.40	2,10,000.00
B	50,000	0.80	40,000.00
C	1,00,000	1.00	1,00,000.00
D	75,000	1.20	90,000.00
Total	3,75,000		4,40,000.00


AVERAGE BETA =	(INVESTMENT * BETA) / TOTAL INVESMENT
	440000 / 375000
	1.173333333

WHEN STOCK E IS TAKEN
Stock	INVESTMENT (i)	Beta (ii)	Investment* Beta (i)* (ii)
E	1,50,000	0.80	1,20,000.00
B	50,000	0.80	40,000.00
C	1,00,000	1.00	1,00,000.00
D	75,000	1.20	90,000.00
Total	3,75,000		3,50,000.00


AVERAGE BETA =	(INVESTMENT * BETA) / TOTAL INVESTMENT
	350000 / 375000
	0.933333333

Change in Beta =	0.933 - 1.173
	-0.240

Answer 2

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