Sherrie Hymes Holds a $200,000 Portfolio Consisting of the Following

Sherrie Hymes holds a $200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.875. $\begin{array}{lrl}\text { Total }&\text { Investment }&\text { Beta }\\\mathrm{A} & \$ 50,000 & 0.50 \\\mathrm{~B} & 50,000 & 0.80 \\\mathrm{C} & 50,000 & 1.00 \\\mathrm{D} & 50,000 & 1.20\\\text { Total }&\$200,000\end{array}$
If Sherrie replaces Stock A with another stock, E, which has a beta of 1.50, what will the portfolio's new beta be?

A) 1.07
B) 1.13
C) 1.18
D) 1.24
E) 1.30

Correct Answer:

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