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