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    Calculation of Beta of the portfolio

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    You hold a portfolio of stocks consisting of the following:

    Stock Beta Current Value

    Blackwater Gas 0.5 $10,000
    Tidy Tom's Cleaners 0.7 $5,000
    Globular Grabbus 1.2 $20,000
    Creative Crafts 1.0 $4,000
    Total: $39,000

    a. What is the beta of the portfolio?
    b. You have decided to sell Creative Crafts for $4,000 and to use the proceeds to buy $4,000 of International Steel stock with a beta of 2.5. After the transaction is complete, what will be the new beta of the portfolio? (Disregard any commissions on the buy and sell transactions).

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    Solution Summary

    The solution discusses beta of the portfolio

    $2.19