Homework Help: Investing ( pease help)

Posted by Lindsey on Friday, July 24, 2009 at 5:00pm.

You hold a diversified $ 100,000 portfolio consisting of 20 stocks with 5000 invested in each . The portfolio's beta is 1.12. You plan to sell a stock with b=0.90 and use the proceeds to buy a new stock with b=1.75. what will the portfolio new beta be ?

PLEASE Help me i'm so stuck on this problem

Investing ( pease help) - MathMate, Saturday, July 25, 2009 at 8:25am
A portfolio beta is the weighted sum of the individual betas.

For a given portfolio beta of 1.12, and since the 20 constituent stocks are worth $5000 each, they have equal weights.

By exchanging one stock with beta of 0.9 for one with beta=1.75 the new portfolio beta is
(20*1.12-0.9+1.75)/20
= 1.1625
=1.16

Answer this Question

Related Questions

Investing - You hold a diversifield $ 100,000 portfolio consisting of 20 stocks ...
investing - You hold a diversified portfolio consisting of a $5 000 investment ...
investing - You have a $ 2 million portfolio consisting of $100,000 investment ...
Financial Management - You have a $2 million portfolio consisting of a $100,000 ...
calculating BETA - I am having the most trouble with this. Any help or direction...
Finance - A portfolio consists of three stocks. The weight, expected rate of ...
Finance - You would like to create a portfolio that is equally invested in a ...
FINANCIAL ACCOUNTING - A portfolio manager is managing a $10 million portfolio. ...
Finance - You own a portfolio that has $1500 invested in Stock A and $2,600 ...
Finance - Supposed you owned a portfolio consisting of $25,000 of US government ...

For Further Reading

First Name:
School Subject:
Answer: