Asked by zaynab
7500$ investment in each of 20 stocks ( beta of portfolio=1.12). suppose you decide to sell one stock that have beta 1 for 7500$, and use them to buy another one of beta=1.75 calculate the beta of new portfolio ?
Answers
Answered by
bobpursley
Easy.
total sum beta now is
(1.12*20-1.12+1.75)=23.03
portfolio beta now=23.03/20=1.15
Caution, if you had not vested equal amounts in each stock, the computation would have to weighed each beta to the value of the stocks, and it would be a little more complicated, but easy for a spreadsheet calc to keep up with.
total sum beta now is
(1.12*20-1.12+1.75)=23.03
portfolio beta now=23.03/20=1.15
Caution, if you had not vested equal amounts in each stock, the computation would have to weighed each beta to the value of the stocks, and it would be a little more complicated, but easy for a spreadsheet calc to keep up with.
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