An investor currently holds the following portfolio: Amount Invested

An investor currently holds the following portfolio:

Amount
Invested
8,000 shares of Stock A $16,000 Beta = 1.3
15,000 shares of Stock B $48,000 Beta = 1.8
25,000 shares of Stock C $96,000 Beta = 2.2
The investor is worried that the beta of his portfolio is too high, so he wants to sell some stock C and
add stock D, which has a beta of 1.0, to his portfolio. If the investor wants his portfolio to have a beta
of 1.72, how much stock C must he replace with stock D?
A) $31,000 B) $24,000 C) $18,000 D) $36,000

ANSWER

D