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

question 112

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?


Definitions:

Delegation

The assignment of authority and responsibility from one person to another to carry out specific activities while the former remains accountable for the outcome.

Competency

The ability to do something successfully or efficiently.

Policy-Making Councils

Groups or bodies that are responsible for the development and formulation of guidelines, rules, or regulations.

Elected Members

Individuals who have been chosen or voted into a particular position or office by a group or electorate.

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