An investor, who believes the economy is slowing down, wishes to reduce the risk of her portfolio. She currently owns 12 securities, each with a market value of $3,000. The current beta of the portfolio is 1.21 and the beta of the riskiest security is 1.62. What will the portfolio beta be if the riskiest security is replaced with a security of equal market value but a beta of 0.80

1.14

Explanation:

Investors has number of securities = 12

Each with a market value = $3,000

Current beta of the portfolio (before replacement of riskiest security ) = 1.21

Beta of the riskiest security= 1.62

If the riskiest security is replaced = 0.80

Portfolio Beta before replacement of the riskiest security = Remaining number of securities / total number of securities * Beta of securities + Number of riskiest security / total number of securities * Beta of the riskiest security

Portfolio Beta before replacement of the riskiest security = Weight of securities*Beta of securities + Weight of riskiest security*Beta of riskiest security

Let the beta of securities be x.

1.21 =11/12 *x + 1/12 *1.62

1.21 =11/12 *x +0.135

1.21-0.135 = 11/12 x

1.075 =11/12 x

x = 1.075*12/11

x = 1.1727

Beta of securities = 1.17

Portfolio beta after the replacement of the riskiest security = 11/12*1.17 +1/12*0.8 = 1.0725 + 0.0666 = 1.1391 = 1.14

you can lose ranking 2 ways.

1) you don't have enough points due to you expending them by asking questions/your answers are deleted.

2) your brainliest's expired. this means that brainliests, once they exceed the 30 day limit, expires. this is to ensure that you continue to contribute into the community at a constant rank if you want to continue to have/exceed the rank you have right now.

if you go to profile, and click "show more information" located on the bottom left of the box with your information (on top of the questions answered, questions asked, and friends), you will be given the following information (example):

member since : 02/13/2017, 18: 11

questions answered: 9741

questions asked: 162

no. of brainliest answers: 1575

brainliest answers in last 30 days: 10

warnings: 0 view

questions/answers reported: 2637

questions/answers incorrectly reported: 64

look at the "brainliest answers in the last 30 days". this is the one that will affect your rank other than your points. again, once your brainliest expires (was earned 31+ days ago), it will not be counted.

~