What Should Be the Beta of a Replacement Stock If

question 49

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) .93 beta
• B) 1.00 beta
• C) 1.08 beta
• D) 1.15 beta

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Definitions:

Market Segmentation

The process of dividing a broader market into smaller, more homogeneous groups of consumers with similar needs, characteristics, or behaviors.

Precisely Define

To specify something in a clear and exact manner, leaving no room for ambiguity or misunderstanding.

Form Utility

is the value added to products through the creation of features and function that make them more desirable to consumers.

Product Availability

The degree to which a product can be readily acquired by customers, often a critical factor in customer satisfaction and retention.