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Your portfolio contains 10 stocks which are held in equal amounts. The portfolio beta is 1.66. The beta of one of the ten stocks (let’s call it stock A) is 2.20. You wish to lower the portfolio beta to 1.50 by selling all of stock A and replacing it with a new stock. In order to create a new portfolio beta of 1.50, what must be the beta of the new stock?

Financial Management, Finance

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