Problem:
Suppose you hold a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, suppose you have decided to sell one of the stocks in your portfolio with a beta equal to 1.0 for $7,500, and use these proceeds to buy another stock for your portfolio. Assume the new stock's beta is equal to 1.75. Calculate your portfolio's new beta.