Business, 18.03.2020 06:14 jackiediaz
Your retirement fund consists of a $5,000 investment in each of 15 different common stocks. The portfolio's beta is 1.20. Suppose you sell one of the stocks with a beta of 0.8 for $5,000 and use the proceeds to buy another stock whose beta is 1.6. Calculate your portfolio's new beta.
Answers: 1
![\text{Beta}=\text{Total Portfolio}-[(\text{Weightage}\times\text{Beta of Selling Stock})+(\text{Weightage}\times\text{Beta of Purchased Stock})]](/tpl/images/0552/0433/d3690.png)
![\begin{aligned}\text{New Portfolio Beta}&=1.20-[(\frac{1}{15}\times0.8)+(\frac{1}{15}\times1.6)]\\&=1.25\end{aligned}](/tpl/images/0552/0433/d300c.png)
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