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May 03 , 2009

Calculation of Porfolio’s New Beta


Suppose you hold a diversified portfolio consisting of a $10,000 invested equally in each of 10 different common stocks. The portfolio's beta is 1.12. Now suppose you decided to sell one of your stocks that has a beta of 1.00 and to use the proceeds to buy a replacement stock with a beta of 2.10. What would the portfolio's new beta be?

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