You Hold a Diversified Portfolio Consisting of a $5,000 Investment

Multiple Choice

You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.15. You have decided to sell one of your stocks, a lead mining stock whose b is equal to 1.0, for $5,000 net and to use the proceeds to buy $5,000 of stock in a steel company whose b is equal to 2.0. What will be the new beta of the portfolio?

A) 1.12
B) 1.20
C) 1.22
D) 1.10
E) 1.15