Question 12

Looking at a list of beta coefficients you spot a number of stocks as possible buys for your new stock portfolio. You have $125,000 to invest. You have decided to have just three stocks in your portfolio (this will make it easier to follow than a portfolio of more stocks). You have selected two already: The Gap with a beta of .4 and Disney with a beta of .95. You have invested $15,000 in each. For the final selection you are looking at Ford with a beta of 1.56, ebay with a beta of .88, IBM with a beta of 0.99 and the parent of Anheuser-Busch with a beta of 1.2. You would like the overall beta of your portfolio to be as close to "the market" or "average stock" as possible.