Respuesta :
Answer:
- 0.260
Explanation:
The computation of portfolio beta is shown below:-
Stocks Value Weight (a) Beta (b) Portfolio Beta (a × b)
Stock A $150,000 0.4000 1.4 0.560
Stock B $50,000 0.1333 0.8 0.107
Stock C $100,000 0.2667 1 0.267
Stock D $75,000 0.2000 1.2 0.240
Total $375,000 1.173
Now the revise of beta with stock E is
Stocks Value Weight (a) Beta (b) Portfolio Beta (a × b)
Stock E $150,000 0.4000 0.75 0.300
Stock B $50,000 0.1333 0.8 0.107
Stock C $100,000 0.2667 1 0.267
Stock D $75,000 0.2000 1.2 0.240
Total $375,000 0.913
Now
Net Change in Beta of Portfolio is
= Beta of portfolio with Stock E - Beta of Portfolio with Stock A
= 0.913 - 1.173
= - 0.260
This is the answer but the same is not provided in the given options
The change in portfolio beta is -0.26.
Beta is used to measure systemic risk. The higher the value of beta, the higher systemic risk is. A portfolio's beta can be determined by adding together the weighted beta of each stock in the portfolio
Weighed beta of a stock = percentage of the stock in the portfolio x beta of the stock
Beta of the initial portfolio
[(150,000 / 375000) x 1.4] + [(50,000 / 375000) x 0.8] + [(100,000/ 375,000) x 1] + [(75,000 / 375,000) x 1.2]
= 0.56 + 0.1067 + 0.2667 + 0.24 = 1.1734
Beta of the new portfolio
[(150,000 / 375000) x 0.75] + [(50,000 / 375000) x 0.8] + [(100,000/ 375,000) x 1] + [(75,000 / 375,000) x 1.2]
0.3 + 0.1067 + 0.2667 + 0.24 = 0.9134
Change in portfolio beta = -0.26
To learn more about beta, please check: https://brainly.com/question/2279630
