Steve Brickson currently has an investment portfolio that contains four stocks with a total value equal to $80,000. The portfolio has a beta (β) equal to 1.4. In order to earn higher returns, Steve wants to invest an additional $20,000 in a stock that has β equal to 2.4. After Steve adds the new stock to his portfolio, what will the portfolio's beta be?
A) 1.6
B) 1.8
C) 1.9
D) 2.0
E) 2.1

Question

Quizplus · Accepted Answer

The new portfolio beta is calculated as: (80,000 * 1.4 + 20,000 * 2.4) / (80,000 + 20,000) = 1.6.

Steve Brickson Currently Has an Investment Portfolio That Contains Four