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A Portfolio of Three Stocks with Total Market Value of $1,000,000

question 83

Essay

A portfolio of three stocks with total market value of $1,000,000 currently has a Beta of 1.4.In light of an expected market downturn, you wish to reduce the portfolio Beta to no more than 1.0.Two stocks are likely candidates for sale, one with a Beta of 1.8 and a market value of $200,000 and the other with a Beta of 1.5 and a market value of $250,000.Assuming that you could find one appropriate stock to replace these two, what should be its Beta?


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