Jill Angel Holds a $200,000 Portfolio Consisting of the Following

question 115

Multiple Choice

Jill Angel holds a $200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.875. $$\begin{array} { l r r } \underline { \text { Stock }} & \underline { \text { Investment } } & \underline { \text { Beta } } \\\text { A } & \$ 50,000 & 0.50 \\\text { B } & 50,000 & 0.80 \\\text { C } & 50,000 & 1.00 \\\text { D } & \underline { 50,000 } & 1.20 \\\text { Total } & \underline { \$ 200,000 } &\end{array}$$ If Jill replaces Stock A with another stock, E, which has a beta of 1.50, what will the portfolio's new beta be?

• A) 1.07
• B) 1.13
• C) 1.18
• D) 1.24
• E) 1.30

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply and demand balance.

Quantity Demanded

The collective measure of a commodity or service that people are eager and have the means to purchase at an identified price level.

Quantity Supplied

Refers to the total amount of a good that producers are willing to sell at a given price over a specific period.

Equilibrium Price

The market cost where the supply of merchandise matches the demand level.