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3. Assume you invest an equal dollar amount ($5,000) in each of the 5 companies selected. a. Calculate the Portfolio beta by using the following
3. Assume you invest an equal dollar amount ($5,000) in each of the 5 companies selected. a. Calculate the Portfolio beta by using the following equation: .20 times (Company 1 beta (1.24) + .20 times (Company 2 beta-(2.13) +.20 times (Company 3 beta (1.75) + .20 times (Company 4 beta (2.38) +.20 times (Company 5 beta (1.47)) = Portfolio Beta
Questions b. How does the Portfolio Beta for your 5 companies compare to the Market Beta of 1? c. Would you expect the return of your investment of $25,000 to increase, remain the same, or decrease? Why?
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