Question: Terry recently invested equal amounts in five stocks to form
Terry recently invested equal amounts in five stocks to form an investment portfolio, which has a beta equal to 1.2—that is, βP = 1.2. Terry is considering selling the riskiest stock in the portfolio, which has a beta coefficient equal to 2.0, and replacing it with another stock. If Terry replaces the stock that has a equal to 2.0 with a stock that has a equal to 1.0, what will be the new beta of his investment portfolio? Assume that equal amounts are invested in each stock in the portfolio.
Answer to relevant QuestionsSuppose that you hold a diversified portfolio consisting of 20 different stocks, with $7,500 invested in each of the stocks. The portfolio beta is equal to 1.12. You have decided to sell one of the stocks in your portfolio ...Stock A and Stock B have the following historical returns:a. Calculate the average rate of return for each stock during the period 2011–2015.b. Assume that someone held a portfolio consisting of 50 percent Stock A and 50 ...In what sense is a firm’s WACC also the rate of return that should be earned on its investments?You are given the following information about a firm:The firm expects to retain $160,000 in earnings this year to invest in investment projects. If the firm’s capital budget is expected to equal $180,000, what required ...The management of Ferri Phosphate Industries (FPI) is planning next year’s capital budget. FPI projects its net income at $7,500, and its dividend payout ratio is 30 percent. The company’s earnings and dividends are ...
Post your question