# Calculating Beta of Portfolio after Portfolio Change

 Calculating Beta of Portfolio after Portfolio Change Charles Raphael, Student (Part Time), Malaysia Please help me to solve this question: You have \$2 million portfolio consisting of a \$100,000 investment in each of 20 different stock. The portfolio has a beta equal to 1.1. You are considering selling \$100,000 worth of one stock which has a beta equal to 0.9 and using the proceeds buy another stock which has beta equal to 1.4. What will be the new beta of your portfolio following this transaction?
 I Would Calculate the Weighted Average Beta of the PortfolioRamon, Consultant, SpainI calculate the weighted average and obtain a new beta of 1.1250.

 CAPM of Changed Portfoliosantosh, Teacher, NepalPlease calculate the weighted beta of remaining 19 stocks using 19/20 as their weight and 1/20 as the weight of stock to be removed. Use as equation: 19/20*b +1/20*0.9 = 1.1. Determine the value of b which is the weighted beta of 19 stocks. Then again calculate the weighted beta of 20 stocks portfolio as 19/20*b +1/20*1.4.

 Portfolio Betaabdollah, Student (Other), IranThe beta of your portfolio is: (100'000/2'000'000)*b1+(1/20)b2+...+(1/20) 0.9=1.1 So 1.1=1/20*(b1+b2...+b19)+1/20*.09 B1+b2+..+b19=21.1 Now the new portfolio beta is: 1/20* 21.1+1/20*1.4=1.125.

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