A Diversified Portfolio's New Beta
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Suppose you hold a diversified portfolio consisting of $10,000 invested equally in each of 10 different common stocks. The portfolio's beta is 1.12. Now suppose that you decided to sell one of your stocks that has a beta of 1.00 and to use the proceeds to buy a replacement stock with a beta of 1.95. What would the portfolio's new beta be?
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Solution Summary
This solution calculates the new beta of a portfolio.
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since the portfolio is invested equally, your sum total of betas for ...
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- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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