Question
In: Finance
Jill Angel holds a $200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.875....
Jill Angel holds a $200,000 portfolio consisting of the
following stocks. The portfolio's beta is 0.875.
| Stock | Investment | Beta | ||
| A | $50,000 | 0.50 | ||
| B | $50,000 | 0.80 | ||
| C | $50,000 | 1.00 | ||
| D | $50,000 | 1.20 | ||
| Total | $200,000 |
If Jill replaces Stock A with another stock, E, which has a beta of 1.60, what will the portfolio's new beta be?
a. 1.10
b. 0.85
c. 1.35
d. 1.30
e. 1.15
Solutions
Expert Solution
Ans e. 1.15
| Stock | INVESTMENT (i) | Beta (ii) | Investment* Beta (i)* (ii) |
| E | 50,000 | 1.60 | 80,000.00 |
| B | 50,000 | 0.80 | 40,000.00 |
| C | 50,000 | 1.00 | 50,000.00 |
| D | 50,000 | 1.20 | 60,000.00 |
| Total | 2,00,000 | 2,30,000 | |
| AVERAGE BETA = | (INVESTMENT * BETA) / TOTAL INVESMENT | ||
| 230000 / 200000 | |||
| 1.15 | |||
jeff jeffy answered 1 year agoRelated Solutions
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