Please use question 4 data to answer question 5. Question 4 does not need to be answered.

4. A $20 million portfolio is currently invested in a value stock fund named VAL. Fund VAL beta is 0.50. The portfolio manager considers switching some of the portfolio into a growth stock fund GRO that has a beta of 1.90. What would be the new portfolio allocation (investment in VAL and in GRO) that will achieve his portfolio beta of 1.40 goals?

5. Use previous homework assignment question 4 data. Using SPY as a proxy for the market, evaluate the two stock betas (you can use the formula COV(1,2)/(SD1*SD2), or Excel slope(.) function). Compare your result to the Bloomberg reported beta (in the stock quote screen write BETA and press GO).