You Hold a Diversified $100,000 Portfolio Consisting of 20 Stocks

question 79

Multiple Choice

You hold a diversified $100,000 portfolio consisting of 20 stocks with $5,000 invested in each.The portfolio's beta is 1.12.You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 2.50.What will the portfolio's new beta be? Do not round your intermediate calculations.

• A) 1.032
• B) 1.260
• C) 1.476
• D) 1.200
• E) 1.236

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Definitions:

Altruism

The principle or practice of concern for the welfare of others, often at the expense of one's self-interest.

Reproductive Success

The extent to which an organism passes its genes to the next generation, often measured by the number of offspring that survive to reproduce.

Lever

A rigid bar resting on a pivot, used to help move a heavy or firmly fixed load with one end when pressure is applied to the other.

Food Pellet

A compressed unit of food, often used in animal feeding, which is designed for easy storage, handling, and consumption.