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:

Dependent Personality Disorder

A psychiatric condition marked by an excessive emotional or psychological reliance on another person.

Theoretical Orientation

A framework or perspective in psychology that guides how a therapist or researcher understands and approaches the client or study subject.

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Subjected to harsh or stern judgment, often in a way that is more extreme than warranted.

Reinforce Clinging

The act of strengthening or encouraging dependent or overly needy behavior in relationships.