Explore BrainMass

Explore BrainMass

    New beta portfolio

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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?

    a) 1.200
    b) 1.152
    c) 1.308
    d) 0.912
    e) 1.008

    © BrainMass Inc. brainmass.com June 3, 2020, 11:54 pm ad1c9bdddf

    Solution Preview

    The portfolio beta is the weighted average of individual stock beta. If we sell a stock, the portfolio ...

    Solution Summary

    The solution explains how to calculate the new beta of the portfolio.