What Should Be the Beta of a Replacement Stock If

question 76

Multiple Choice

What should be the Beta of a replacement stock if an investor wishes to achieve a portfolio Beta of 1.0 by replacing Stock C in the following equally weighted portfolio: Stock A = .9 Beta; Stock B = 1.1 Beta; Stock C = 1.35 Beta?

• A) 0.93 Beta
• B) 1.00 Beta
• C) 1.08 Beta
• D) 1.15 Beta

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Definitions:

Motives

Motives are psychological forces that drive an individual to perform actions that are aimed at satisfying needs or achieving certain goals.

Tension Reduction

A psychological process or technique aimed at decreasing stress or anxiety levels in an individual, often through relaxation or problem-solving strategies.

Biological Factors

Components and influences stemming from the biological level, such as genetics, neurochemical imbalances, and brain structure, affecting an individual's health and behavior.

Social Factors

External societal influences that affect an individual's behavior, attitudes, and life chances.