You Hold a Diversified Portfolio Consisting of a $10,000 Investment

question 38

Multiple Choice

You hold a diversified portfolio consisting of a $10,000 investment in each of 20 different common stocks . The portfolio beta is equal to 1.2. You have decided to sell one of your stocks which has a beta equal to 0.7 for $10,000. You plan to use the proceeds to purchase another stock which has a beta equal to 1.4. What will be the beta of the new portfolio?

• A) 1.165
• B) 1.235
• C) 1.250
• D) 1.284
• E) 1.333

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Definitions:

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