You Hold a Diversified Portfolio Consisting of $1,000 Investment in Each

question 101

Multiple Choice

You hold a diversified portfolio consisting of $1,000 investment in each of 10 different stocks. The portfolio has a beta of 0.8. You have decided to sell one of your stocks that has a beta equal to 1.1 for $1,000. You will purchase $1,000 of a new stock with a beta of 2.5. After these two transactions (sell and buy) , what will be the beta of the new portfolio?

• A) 1.1
• B) 0.99
• C) 0.87
• D) 0.94

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Definitions:

Percent

A mathematical term representing a part per hundred, used in expressing proportions, rates, or fractions in statistics and daily computations.

Positivists

Individuals or scholars who adhere to the philosophy that knowledge should be derived from scientific observation and empirical evidence.

Experimentation

The process of testing hypotheses or trying out new ideas, methods, or activities to gain knowledge or achieve specific outcomes.

Quantitative Sociology

A research methodology within sociology that focuses on the use of numerical data and statistical methods to understand social phenomena.