You Hold a Diversified Portfolio Consisting of $1,000 Investment in Each

question 101

Multiple Choice

You hold a diversified portfolio consisting of $1,000 investment in each of 10 different stocks. The portfolio has a beta of 0.8. You have decided to sell one of your stocks that has a beta equal to 1.1 for $1,000. You will purchase $1,000 of a new stock with a beta of 2.5. After these two transactions (sell and buy) , what will be the beta of the new portfolio?

• A) 1.1
• B) 0.99
• C) 0.87
• D) 0.94

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Definitions:

LDCs

Less Developed Countries, which are countries that exhibit the lowest indicators of socioeconomic development.

Birth Rate

The number of live births per thousand people in a population within a given year.

LDCs

Less Developed Countries, which are nations with lower levels of income, industrialization, and modernization.

Industrial Countries

Nations that are characterized by a high level of industrialization, technological advancement, and a relatively high standard of living.