Problem:
Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.85. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and to use these proceeds to buy another stock with a beta of 1.47.
Required:
Question 1: What would your portfolio's new beta be? Please provide step by step solution.