contestada

Jill Angel holds a $200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.88. Stock Investment Beta A $50,000 0.50 B $50,000 0.80 C $50,000 1.00 D $50,000 1.20 Total $200,000 If Jill replaces Stock A with another stock, E, which has a beta of 1.45, what will the portfolio's new beta be

Respuesta :

abiolataiwo2015

Answer:

1.11

Explanation:

Calculation for what will the portfolio's new beta be

First step is to Calculate the weight of each investment

Stock E $ 50,000 / $ 2,00,000

Stock E= 0.25

Stock B $ 50,000 / $ 2,00,000

Stock B= 0.25

Stock C $ 50,000 / $ 2,00,000

Stock C = 0.25

Stock D $ 50,000 / $ 2,00,000

Stock D = 0.25

Now let calculate the portfolio new beta

Weight Beta

Stock E 0.25* 1.45 = 0.36

Stock B 0.25 * 0.80 = 0.20

Stock C 0.25* 1.00 = 0.25

Stock D 0.25 * 1.20 = 0.30

Total 1.11

(0.36+0.20+0.25+0.30)

Therefore portfolio's new beta will be 1.11

Otras preguntas