EBK CFIN
6th Edition
ISBN: 9781337671743
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 8, Problem 12PROB
Summary Introduction
Portfolio beta is used to measure the portfolio’s overall systematic risk of an investment which equals the weighted average of all individual stock’s beta coefficient in a portfolio.
The amount of $120,000 invested in four stocks and its portfolio’s beta coefficient is equal to 0.8. The value of the stock which is to be sold is $48,000 and its beta coefficient is 1.
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Michael holds a portfolio that has an expected return of 11.0%, a total value of $90,000, and a beta of 1.20. He is in the process of buying $10,000 worth of TTR stock and adding it to his portfolio. TTR has an expected return of 13.0% and a beta of 1.50. What will the beta of the portfolio be after the purchase of the TTR stock?
Suppose you hold a diversified portfolio consisting of a $4,000 investment in each of 14 different common stocks. The portfolio beta is 1.30. You decide to sell one of the stocks in your portfolio with a beta equal to 0.8 for $3,500 and use these proceed to buy another stock for your portfolio. Assume the new stock’s beta is equal to 1.75. Calculate your portfolio’s beta.
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