Working with Portfolio Betas
Not what you're looking for?
Suppose you hold a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, suppose you have decided to sell one of the stocks in your portfolio with a beta equal to 1.0 for $7,500 and to use these proceeds to buy another stock for your portfolio. Assume the new stock's beta is equal to 1.75 Calculate your portfolio's new beta.
Purchase this Solution
Solution Summary
The solution explains how to calculate the new beta of a portfolio given a change in composition of the portfolio.
Solution Preview
The portfolio beta is the weighted average of individual beta, with the investment proportion as the weight. There are 20 stocks and each is worth $7,500. The total portfolio value is ...
Purchase this Solution
Free BrainMass Quizzes
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.