You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks. The portfolio beta is equal to
1.12. You have decided to sell a lead mining stock (b = 1.00) at
$5,000 net and use the proceeds to buy a like amount of a steel company stock (b = 2.00). What is the new beta of the portfolio?
A) 1.1139
B) 1.1700
C) 1.2311
D) 1.2927
E) 1.3573

Question

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The Answer of You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks. The portfolio beta is equal to
1.12. You have decided to sell a lead mining stock (b = 1.00) at
$5,000 net and use the proceeds to buy a like amount of a steel company stock (b = 2.00). What is the new beta of the portfolio?
A) 1.1139
B) 1.1700
C) 1.2311
D) 1.2927
E) 1.3573

You Hold a Diversified Portfolio Consisting of a $5,000 Investment