What Should Be the Beta of a Replacement Stock If

question 86

Multiple Choice

What should be the beta of a replacement stock if an investor wishes to achieve a portfolio beta of 1.2 by replacing stock C in the following equally weighted portfolio: stock A = 0.9 beta; stock B = 1.1 beta; stock C = 1.35 beta?

• A) 0.7
• B) 1.6
• C) 1.2
• D)1.8

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Definitions:

Caribbean

A region consisting of the Caribbean Sea, its islands (including the West Indies), and the surrounding coasts, noted for its unique cultural, geological, and historical significance.

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Caribbean

A region consisting of the Caribbean Sea, its islands, and the surrounding coasts.

Wage Labor System

An economic system where workers sell their labor in exchange for wages, often characterized by the employment relationship between employer and employee.