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3 September, 05:05

Suppose you hold a portfolio consisting of a $50,000 investment in each of 8 different common stocks. The portfolio's beta is 1.25. Now suppose you decided to sell one of your stocks that has a beta of 1.00 and to use the proceeds to buy a replacement stock with a beta of 1.55. What would the portfolio's new beta be? 1.17 1.23 1.29 1.32 1.43

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  1. 3 September, 05:15
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    Correct Answer is 1.32

    Explanation:

    Increase in beta as a result of net sales = (1.55-1) = 0.55

    Hence increase/stock=0.55/8

    =0.06875

    Hence, New beta=1.25+0.06875

    =1.32 (Approx).
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