Question:
Assume that you hold a portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, assume that you decide 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 that the new stock's beta is equal to 1.75.
Calculate your portfolio's new beta.