You Hold a Diversified Portfolio Consisting of a $5,000 Investment

question 45

Multiple Choice

You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.15. You have decided to sell one of your stocks, a lead mining stock whose b is equal to 1.0, for $5,000 net and to use the proceeds to buy $5,000 of stock in a steel company whose b is equal to 2.0. What will be the new beta of the portfolio?

• A) 1.12
• B) 1.20
• C) 1.22
• D) 1.10
• E) 1.15

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Definitions:

Statute of Frauds

A legal principle requiring certain types of contracts to be in writing in order to be enforceable, such as contracts for the sale of land or goods over a certain value.

Breached Contract

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Uniform Electronic Transactions Act (UETA)

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Electronic Commerce

The buying and selling of goods and services, or the transmission of funds or data, over an electronic network, primarily the internet.