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Question
An investor currently holds the following portfolio:| Amount Invested | ||
| 8,000 shares of Stock A | $16,000 | Beta = 1.3 |
| 15,000 shares of Stock B | $48,000 | Beta = 1.8 |
| 25,000 shares of Stock C | $96,000 | Beta = 2.2 |
The investor is worried that the beta of his portfolio is too high, so he wants to sell some stock C and add stock D, which has a beta of 1.0, to his portfolio. If the investor wants his portfolio to have a beta of 1.72, how much stock C must he replace with stock D?
A) $18,000
B) $24,000
C) $31,000
D) $36,000
Answer
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