Question 3 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 stocks for your portfolio. Assume the new stock's beta to 1.75. Calculate your portfolio's new beta.
Question 3 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 stocks for your portfolio. Assume the new stock's beta to 1.75. Calculate your portfolio's new beta.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Question 3
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 stocks for your portfolio. Assume the new stock's beta to 1.75.
Calculate your portfolio's new beta.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff1d390b7-d22e-4e24-94c4-fd747ca1a914%2Fe4f2a2a1-c32f-455a-a6e8-4600af3507a4%2Fmbwxv3g_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 3
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 stocks for your portfolio. Assume the new stock's beta to 1.75.
Calculate your portfolio's new beta.
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