A portfolio contains equal investments in 3 stocks. Stock 1 has a beta of 1.2 , Stock 2 has a beta of 1.3 , Stock 3 has a beta of 1.4 .
Suppose that the investor sells entirely stock 2. Half the money obtained is used to buy Stock 1. The remaining half is used to buy stock, What is the beta of the new and old portfolio.
Beta of Old Portfolio = 1.3
Beta of New Portfolio = 0.50(1.2) + 0.50(1.4) = 1.3
So,
beta of New Portfolio = 1.3
A portfolio contains equal investments in 3 stocks. Stock 1 has a beta of 1.2 ,...