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An investor holds a diversified portfolio consisting of $10,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.2. He

An investor holds a diversified portfolio consisting of $10,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.2. He has decided to sell one of his stocks that has a beta equal to 0.7 for $10,000. He plans to use the proceeds to purchase another $10,000 stock that has a beta equal to 0.8. What will be the beta of the new portfolio?

A) 1.125

B) 1.205

C) 1.284

D) 1.235

E) 1.25

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