You Hold a Diversified Portfolio Consisting of a $5,000 Investment

question 33

Multiple Choice

You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks.The portfolio beta is equal to 1.15.You have decided to sell one of your stocks,a lead mining stock whose β = 1.0,for $5,000 net and to use the proceeds to buy $5,000 of stock in a steel company whose β = 2.0.What will be the new beta of the portfolio?

• A) 1.12
• B) 1.20
• C) 1.22
• D) 1.10
• E) 1.15

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Definitions:

SELL Sequence

A sales technique that includes steps to Show, Explain, Lead through benefits, and Let the customer talk.

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A cutting and cleaning tool that uses high-pressure water for various industrial, construction, and cleaning purposes.

Pièce De Résistance

The most outstanding or special part of a meal, event, or work of art.