You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio's new beta be after these transactions?
The portfolio beta is the weighted average beta of individual stocks with the proportion of investment as the weight. When a ...
The solution explains how to calculate the new beta of the portfolio after the given transactions