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4 August, 20:59

Suppose Stan holds a portfolio consisting of a $10,000 investment in each of 8 different common stocks. The portfolio's beta is 1.25. Now suppose Stan decided to sell one of his stocks that has a beta of 1.00 and to use the proceeds to buy a replacement stock with a beta of 1.35. What would the portfolio's new beta be? a. 1.17b. 1.23c. 1.29d. 1.36e. 1.43

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  1. 4 August, 21:29
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    c. 1.29

    Explanation:

    Change in portfolio beta = weight * (change in security beta) =.125 * (1.35-1) =.04375

    New portfolio beta = 1.25 +.04375 = 1.29375 (c. 1.29 is the correct answer)
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