Details about portfolio of shares of an investor is as below: Shares No. of shares (lakh) Price per share Beta A Ltd. 3.00 500 1.40 B Ltd. 4.00 750…

Shares No. of shares (lakhs) (1) Market Price of Per Share (2) × (2) (₹ lakhs) % to total (w) β (x) WX A Ltd. 3.00 500.00 1500.00 0.30 1.40 0.42 B Ltd. 4.00 750.00 3000.00 0.60 1.20 0.72 C Ltd. 2.00 250.00 500.00 0.10 1.60 0.16 5000.00 1.00 1.30 (1) Portfolio beta 1.30 (2) Required Beta 0.91 Let the proportion of risk free securities for target beta 0.91 = p 0.91 = 0 x p + 1.30 (1 – p) p = 0.30 i.e. 30% Shares to be disposed off to reduce beta (5000 × 30%) ₹ 1,500 lakh and Risk Free securities to be acquired. (3) Number of shares of each company to be disposed off Shares % to total (w) Proportionate Amount (₹ lakhs) Market Price Per Share No. of Shares (Lakh) A Ltd. 0.30 450.00 500.00 0.90 B Ltd. 0.60 900.00 750.00 1.20 C Ltd. 0.10 150.00 250.00 0.60 (4) Number of Nifty Contract to be sold (1.30-0.91) × 5000 lakh / (8,125 × 200) = 120 contracts (5) 2% rises in Nifty is accompanied by 2% x 1.30 i.e. 2.6% rise for portfolio of shares ₹ Lakh Current Value of Portfolio of Shares 5000 Value of Portfolio after rise 5130 Mark-to-Market Margin paid (8125 × 0.020 × ₹ 200 × 120) 39 Value of the portfolio after rise of Nifty 5091 % change in value of portfolio (5091 – 5000)/ 5000 1.82% % rise in the value of Nifty 2% Beta 0.91