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:

Comparative Geography

The study of the various characteristics of different places on Earth, focusing on similarities and differences.

Adaptive Trait

A characteristic of an organism that increases its chances of survival and reproduction in a specific environment.

Population

A group of individuals of the same species living in a particular geographic area and capable of interbreeding.

Meteorite Impact

Occurs when a meteoroid survives its passage through the Earth's atmosphere and impacts the surface, often resulting in craters and sometimes affecting the environment or climate.