You hold a diversified portfolio consisting of $10,000 in each of 20 different common stocks (i.e., your total investment is $200,000). The portfolio beta is 1.2. You have decided to sell one of your stocks whose beta is 0.7 for $10,000 (You may refer to this stock as "stock 2"). Calculate the beta of the remaining portfolio of 19 stocks.

Question options:

What is the beta estimate? What does it mean?

Question 18 options:

1)	0.4542; the stock is less than half as volatile as the market

2)	0.04542; the stock is not statistically significantly volatile because the p-value associated with the slope is zero

3)	5.49; the stock is very highly volatile compared to the market

4)	It is difficult to tell since beta estimate is not explicitly shown in the regression output.

2.

The following is a market model regression output. The dependent variable is Abbott Laboratories (ABT) and the explanatory variable is S&P 500 total return index. What proportion of the total variation in ABT is explained by the regression?

Regression Statistics
Multiple R	0.3341
R Square	0.1116
Adjusted R Square	0.1079
Standard Error	0.0560
Observations	242
ANOVA
	df	SS	MS	F	P-value
Regression	1	0.0945	0.0945	30.1556	0.0000
Residual	240	0.7522	0.0031
Total	241	0.8467
	Coeff.	Std. Err.	t Stat	P-value
Intercept	-0.0067	0.0036	-1.8253	0.0692
SPTR	0.4542	0.0827	5.4914	0.0000

At the 1 percent level of significance, the regression is statistically significant.

Question 17 options:

1)	Yes, because F statistic is greater than p-value

2)	Yes, because t statistic is greater than p-value

3)	Yes, because p-value is less than 1 percent

4)	No because p-value is zero

5)	No because the beta value is less than 1