You have decided to sell raytheon for 16000 and to use

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You hold a portfolio of stocks consisting of the following:

               Stock                     Beta       Current Value

            Caterpillar                    1.0           $20,000

            CitiCorp                       0.6           $23,000

            Wendy's                      0.7           $18,000

            Raytheon                     1.1           $19,000

                                                    Total:   $80,000

a.  What is the beta of the portfolio?

b.  You have decided to sell Raytheon for $16,000 and to use the proceeds to buy $16,000 of LuluLemon stock with a beta of 1.5.  After the transaction is complete, what will be the new beta of the portfolio?  (Disregard any commissions on the buy and sell transactions.)

Reference no: EM13477089

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