Sherrie Hymes holds a $200,000 portfolio consisting of the following stocks.The portfolio's beta is 0.875.
If Sherrie replaces Stock A with another stock,E,which has a beta of 1.50,what will the portfolio's new beta be?
A) 1.07
B) 1.13
C) 1.18
D) 1.24
E) 1.30

Question

Sherrie Hymes holds a $200,000 portfolio consisting of the following stocks.The portfolio's beta is 0.875. 
If Sherrie replaces Stock A with another stock,E,which has a beta of 1.50,what will the portfolio's new beta be?
A) 1.07 
B) 1.13 
C) 1.18 
D) 1.24 
E) 1.30

Quizplus · Accepted Answer

11ea42d0_c07b_05da_9abf_c9548fd95ae4_TB2090_00 $\begin{array}{cccc} & {\text { New Portfolio }} & \ \text { Stock } & \text { Percentage } & \text { Beta } & \text { Product } \ \text { A }\ \text { B } & 25.00 \% & 0.80 & 0.200 \ \text { C } & 25.00 \% & 1.00 & 0.250 \ \text { D } & 25.00 \% & 1.20 & 0.300 \ \text { E } & 25.00 \% & 1.50 & \underline{0.375} \ \text { Total } & \text { New Portfolio beta }= & 1.125 \ \end{array}$ Alternative solution: (b_E F1F1F1S1F1F1F10 b_A) (%A)+ b_Old = 1.125

Sherrie Hymes Holds a $200,000 Portfolio Consisting of the Following