Walter Jasper Currently Manages a $500,000 Portfolio

question 49

Multiple Choice

Walter Jasper currently manages a $500,000 portfolio. He is expecting to receive an additional $250,000 from a new client. The existing portfolio has a required return of 10.75 percent. The risk-free rate is 4 percent and the return on the market is 9 percent. If Walter wants the required return on the new portfolio to be 11.5 percent, what should be the average beta for the new stocks added to the portfolio?

• A) 1.50
• B) 2.00
• C) 1.67
• D) 1.35
• E) 1.80

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Definitions:

Consignor

The name for the manufacturer in a consigned inventory arrangement.

Consignment

An arrangement in which goods are left in the possession of another party to sell, but the consignor retains ownership until the goods are sold.

Net Realizable Value

The estimated selling price of an asset in the ordinary course of business minus any costs of completion, transportation, and necessary selling expenses.

Direct Costs of Disposal

The expenses directly linked to the process of disposing of an asset, including sales fees and legal costs.