Find the new beta of the portfolio, Finance Basics

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Find the new beta of the portfolio

You hold a portfolio of stocks consisting of the following:

Stock Beta Current Value

Caterpillar 1.0 $20,000

CitiCorp 0.6 $23,000

Wendy's 0.7 $18,000

Raytheon 1.1 $19,000

Total: $80,000

a. What is the beta of the portfolio?

b. You have decided to sell Raytheon for $16,000 and to use the proceeds to buy $16,000 of LuluLemon stock with a beta of 1.5. After the transaction is complete, what will be the new beta of the portfolio? (Disregard any commissions on the buy and sell transactions.)

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Finance Basics: Find the new beta of the portfolio

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Finance Basics: Find the new beta of the portfolio

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