You hold a diversified $100,000 portfolio consisting of 20
stocks with $5,000 invested in each. The portfolio's beta is 1.12.
You plan to sell a stock with b = 0.90 and use the proceeds to buy
a new stock with b = 1.50. What will the portfolio's new beta be?
Do not round your intermediate calculations.
a. 1.185
b. 1.242
c. 1.127
d. 1.150
e. 1.093
Increase in beta as a result of net sales=(1.5-0.9)
=0.6
Hence increase/stock=0.6/20
=0.03
Hence new beta=1.12+0.03
=1.15
You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each. The...
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