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

question 15

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
1.12. You have decided to sell a lead mining stock (b = 1.00) at
$5,000 net and use the proceeds to buy a like amount of a steel company stock (b = 2.00) . What is the new beta of the portfolio?

• A) 1.1139
• B) 1.1700
• C) 1.2311
• D) 1.2927
• E) 1.3573

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Definitions:

Sensor Division

A business unit within a company focused on the development, production, and sale of sensors, which are devices that detect and respond to changes in an environment.

Minimum Acceptable

The lowest standard or quality that is considered satisfactory for a specific purpose.

Connector Division

A segment within a company or industry focused on the development, production, or distribution of connectors or interconnection solutions.

Outside Customers

Individuals or entities that are external to the organization and purchase its products or services, as opposed to internal stakeholders.