An investor holds a diversified portfolio consisting of a P20,000 investment in each of 20 different ordinary stocks. The total investment portfolio amounts to P400,000 while the portfolio beta is equal to 1.2. The investor decided to sell one of the ordinary stocks that has a beta equal to 0.7 for P20,000. The investor plans to use the whole proceeds to purchase another ordinary stock that has a beta of 1.4. What will be the beta of the new portfolio? a. 1.165 b. 1.235 c. 1.222 d. 0.07

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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An investor holds a diversified portfolio consisting of a P20,000 investment in each of 20 different ordinary stocks. The total investment portfolio amounts to P400,000 while the portfolio beta is equal to 1.2.  The investor decided to sell one of the ordinary stocks that has a beta equal to 0.7 for P20,000.  The investor plans to use the whole proceeds to purchase another ordinary stock that has a beta of 1.4. 

What will be the beta of the new portfolio?

a. 1.165
b. 1.235
c. 1.222
d. 0.07
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