document.write( "Question 477491: You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.1. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 1.4. What will the portfolio's new beta be after these transactions? \n" ); document.write( "
Algebra.Com's Answer #327283 by Theo(13342)\"\" \"About 
You can put this solution on YOUR website!
here's a reference that describes how it's done.
\n" ); document.write( "http://www.investorwords.com/tips/271/calculating-your-portfolios-beta.html
\n" ); document.write( "if they're correct, then all you are doing is calculating the average of all your betas based on the relative value of each stock in that portfolio.
\n" ); document.write( "you have 20 stocks in your portfolio.
\n" ); document.write( "each stock in the portfolio is worth 100,000 dollars.
\n" ); document.write( "the portfolio has a beta of 1.1
\n" ); document.write( "that would be the average of the beta of all the stocks in your portfolio.
\n" ); document.write( "you will be selling one stock that has a beta of .9 and using the proceeds to purchase another stock with a beta of 1.4.
\n" ); document.write( "the impact on your portfolios beta should be as follows:
\n" ); document.write( "the $100,000 stock is worth 100,000 / 2,000,000 = .05 of your portfolio
\n" ); document.write( "your portfolio's beta is 1.1
\n" ); document.write( "you subtract .05 * .9 from it and you add .05 * 1.4 to it.
\n" ); document.write( "the resulting impact on the portfolio beta should be:
\n" ); document.write( "1.1 - .05*.9 + .05*1.4 which becomes:
\n" ); document.write( "1.1 - .045 + .07 which becomes:
\n" ); document.write( "1.125
\n" ); document.write( "your portfolios beta after the transaction is equal to 1.125\r
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