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    Calculate an average beta for your portfolio

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    Assume that you hold a portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, assume that you decide to sell one of the stocks in your portfolio with a beta equal to 1.0 for $7,500 and use these proceeds to buy another stock for your portfolio. Assume that the new stock's beta is equal to 1.75.

    Calculate your portfolio's new beta.

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    You are trying to calculate an average beta for your portfolio. Because we do not know all the different stock's betas, we need to make some assumptions. Remember that beta represents volatility of the stock's price movements compared to the beta of the whole index (e.g. S&P ...