You hold a diversified portfolio consisting of a $10,000 investment in each of 10 different common stocks. The portfolio beta is equal to 2. You have decided to sell one of your stocks, a lead mining stock whose beta is equal to 1.8 for $10,000 net and to use the proceeds to buy $10,000 of stock in a steel company whose b is equal to 1.2. What will be the new beta of the portfolio?

Answer rating: 100% (QA)

To calculate the new beta of the portfolio we need to calculate the weighted average of the betas of ... View the full answer