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atroni [7]
3 years ago
14

Suppose you hold a diversified portfolio consisting of a $7500 investment in each of 20 different common stocks. The portfolio's

beta is 1.12. Now, suppose you sell one of the stocks with a beta of 1.0 for $7500 and use the proceeds to buy another stock whose beta is 1.75. Calculate your portfolio's new beta.
Mathematics
1 answer:
natka813 [3]3 years ago
3 0
The beta of the portfolio is the weighted average of the individual asset betas where
 the weights are the portfolio weights.

To get portfolio beta we will replace 1 stock of 20 or 5% of the portfolio.

The other stocks are 95% of the portfolio. 1.12 =0.95 ( b )+0.05*1

b= 1.126316

So not when we replace one and get other stock
Portfolio beta =0.95*1.126316 + 0.05*1.75=1.1575
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3 years ago
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3 0
3 years ago
Please Help Me
wel
X = 3
y = -1 

get the x or y by itself first (second eq. is easier)
So, x + 2y = 1
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Now we get: 
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y = -1 (plug into either eq to get x)

<span>x + 2y = 1
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6 0
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