Tareen investing company invested equal amount in five stocks to form investment portfolio which has a Beta value 1.2, Tareen is considering to sell the riskiest stock in the portfolio which has Beta co-efficient to 2 and replace it with another stock. If Tareen replace the stock with Beta = 2 with a stock with Beta = 1, what will be the new Beta of his investment portfolio. Assume that equal amount is invested in each stock in the portfolio?

Tareen investing company invested equal amount in five stocks to form investment portfolio which has a Beta value 1.2, Tareen is considering to sell the riskiest stock in the portfolio which has Beta co-efficient to 2 and replace it with another stock. If Tareen replace the stock with Beta = 2 with a stock with Beta = 1, what will be the new Beta of his investment portfolio. Assume that equal amount is invested in each stock in the portfolio?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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