A portfolio contains equal investments in 10 stocks. Five have a beta of 1.2; the remainder has

Question:

A portfolio contains equal investments in 10 stocks. Five have a beta of 1.2; the remainder has a beta of 1.4. What is the portfolio beta?

a. 1.3.

b. Greater than 1.3 because the portfolio is not completely diversified.

c. Less than 1.3 because diversification reduces beta.

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...