The problem states that the market went up by 5%. But the solution does not multiply the market change with Beta of the stock portfolio to find the impact on the portfolio. If you compare that to Exhibit 12 (page 128, Reading 38), under the Scenario heading, it’s the other way around. What am I missing here? thanks,
read the question more carefully - it says the stock PORTFOLIO is up 5%, not the stock market. therefore you do not adjust the stock returns by beta.