LeBron holds the following portfolio: Stock Investment Beta A $100,000 1.40 B $100,000 0.70 C...

LeBron holds the following portfolio:

Stock	Investment	Beta
A	$100,000	1.40
B	$100,000	0.70
C	$200,000	1.40
D	$100,000	1.80
Total	$500,000

LeBron plans to sell Stock C and replace it with Stock E, which has a beta of 0.80. By how much will the portfolio beta change?

Expert Solution

Ans 0.54

STOCK	BETA	Investment	Beta * Investment
A	1.40	1,00,000	1,40,000
B	0.70	1,00,000	70,000
C	1.40	2,00,000	2,80,000
D	1.80	1,00,000	1,80,000
		Total	6,70,000


Average beta =	(Beta* Investment) / Total Investment
	670000 / 500000
	1.34


Difference in Beta =	1.34 - 0.80
	0.54

jeff jeffy answered 2 years ago

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