What should be the beta of a replacement stock if an investor wishes to achieve a portfolio beta of 1.0 by replacing stock C in the following equally weighted portfolio: stock A = .9 beta; stock B = 1.1 beta; stock C = 1.35 beta?
A) .93 beta
B) 1.00 beta
C) 1.08 beta
D) 1.15 beta
Correct Answer:
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