Paul McLaren Holds the Following Portfolio Paul Plans to Sell Stock a and Replace It with \\
B&50,000

question 63

Multiple Choice

Paul McLaren holds the following portfolio: $\begin{array}{lll}Stock&Investment&Beta\\A&\$ 150,000 & 1.40 \\B&50,000 & 0.80 \\C&100,000 & 1.00 \\D&75,000 & 1.20\\Total&\$ 375,000 \\\end{array}$
Paul plans to sell Stock A and replace it with Stock E, which has a beta of 0.75. By how much will the portfolio beta change?

• A) $0.190
• B) $0.211
• C) $0.234
• D) $0.260.
• E)$0.286

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Definitions:

Current Stock Price

The current trading price of a specific stock on the stock market.

Cash Cow

A business, product, or asset that generates consistently high amounts of cash flow, often funding other investments or business operations.

Dividend Growth Rate

A measure of the annualized percentage increase in dividends paid out by a company to its shareholders.

Investment Grows

The increase in the value of an investment over time through appreciation, dividends, or interest earnings.