You have a portfolio of 15 stocks, and currently the market value of each group of...
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You have a portfolio of 15 stocks, and currently the market value of each group of stocks is exactly $15,000 (i.e., the current market value of your entire portfolio = $225,000). Your portfolio as a whole currently has a Beta = 1.2. You now decide to sell off your investment in stock #1, which has an estimated Beta = 0.8, and reinvest the proceeds of the sale in stock #16, which has an estimated Beta = 1.6. What will be the new Beta of your adjusted portfolio? Assume the risk-free rate of interest = 5.5% and the Market Risk Premium (RM - RRF) = 6%; what is the required return on your adjusted portfolio? You have a portfolio of 15 stocks, and currently the market value of each group of stocks is exactly $15,000 (i.e., the current market value of your entire portfolio = $225,000). Your portfolio as a whole currently has a Beta = 1.2. You now decide to sell off your investment in stock #1, which has an estimated Beta = 0.8, and reinvest the proceeds of the sale in stock #16, which has an estimated Beta = 1.6. What will be the new Beta of your adjusted portfolio? Assume the risk-free rate of interest = 5.5% and the Market Risk Premium (RM - RRF) = 6%; what is the required return on your adjusted portfolio?
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