What Should Be the Beta of a Replacement Stock If

question 22

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 New Portfolio Beta = (.333 x .9) + (.333 x 1.1) + (.333 x Beta C)
• 1)0 = .3 + .366 +.333 x Beta C
• -)334 = .333 x Beta C

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Definitions:

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The largest North American wren, characterized by its distinctive white and black plumage and adaptation to desert life.

Multicellular Eukaryotes

Organisms made up of multiple cells with complex structures including a membrane-bound nucleus, found in domains such as plants, animals, and fungi.

Photosynthetic Producers

Organisms that convert light energy into chemical energy through photosynthesis, providing the base for most of Earth's food chains.

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Multicellular, eukaryotic organisms in the kingdom Animalia that can move voluntarily and consume organic material.