# investing

You have a \$ 2 million portfolio consisting of \$100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling \$100,000 worth one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio's new beta be after these transactions?

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asked by Kristy
1. 1/20= 5%
older stock contribution of risk= 0.9*0.05=0.045
New stock contribution of risk= 1.4*0.05=0.07
Now just simply eliminating the effect of older beta and adding the contribution of new beta
1.1-0.045+0.07=1.125

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posted by Iqra

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