Answer:
- 0.260
Explanation:
The computation of portfolio beta is shown below:-
Stocks Value Weight (a) Beta (b) Portfolio Beta (a × b)
Stock A $150,000 0.4000 1.4 0.560
Stock B $50,000 0.1333 0.8 0.107
Stock C $100,000 0.2667 1 0.267
Stock D $75,000 0.2000 1.2 0.240
Total $375,000 1.173
Now the revise of beta with stock E is
Stocks Value Weight (a) Beta (b) Portfolio Beta (a × b)
Stock E $150,000 0.4000 0.75 0.300
Stock B $50,000 0.1333 0.8 0.107
Stock C $100,000 0.2667 1 0.267
Stock D $75,000 0.2000 1.2 0.240
Total $375,000 0.913
Now
Net Change in Beta of Portfolio is
= Beta of portfolio with Stock E - Beta of Portfolio with Stock A
= 0.913 - 1.173
= - 0.260
This is the answer but the same is not provided in the given options
