Question
Assume that you own a well-diversified portfolio of securities. the portfolio consists of equal investments into the stock of 10 companies. The market value of
Assume that you own a well-diversified portfolio of securities. the portfolio consists of equal investments into the stock of 10 companies. The market value of each investment is 7,500. the portfolio beta is 1.14. you have decided to sell a stock with the beta of 0.75 and buy the shares of a company with beta 1.80.
QUESTIONS (SHOW ALL STAGES OF CALCULATIONS)
a) explain shortly, what could be the possible reason behind this transaction?
b) calculate the new portfolio beta. hint: the portfolio beta is a weighted average of individual betas
hint: the portfolio beta is a weighted average of individual betas
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
