You Hold a Diversified Portfolio Consisting of a $10,000 Investment

question 38

Multiple Choice

You hold a diversified portfolio consisting of a $10,000 investment in each of 20 different common stocks . The portfolio beta is equal to 1.2. You have decided to sell one of your stocks which has a beta equal to 0.7 for $10,000. You plan to use the proceeds to purchase another stock which has a beta equal to 1.4. What will be the beta of the new portfolio?

• A) 1.165
• B) 1.235
• C) 1.250
• D) 1.284
• E) 1.333

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Definitions:

Net Operating Income

A company's income after operating expenses are subtracted but before interest and taxes are deducted.

Percentage Change

A mathematical calculation that represents the degree of change over time, usually expressed as a percent.

Target Profit

The desired profit a company aims to achieve for a particular product or service over a certain period.

Dollar Sales

The total revenue generated from goods or services sold, measured in dollar value.