Your Mother's Well-Diversified Portfolio Has an Expected Return of 12 $\quad\underline{\text {Ip}}\quad\quad\underline{\text {bp}}$

question 23

Short Answer

Your mother's well-diversified portfolio has an expected return of 12.0% and a beta of 1.20.She is in the process of buying 100 shares of Safety Corp.at $10 a share and adding it to her portfolio.Safety has an expected return of 15.0% and a beta of 2.00.The total value of your current portfolio is $9,000.What will the expected return and beta on the portfolio be after the purchase of the Safety stock?
$\quad\underline{\text {Ip}}\quad\quad\underline{\text {bp}}$
a. $11.69 \% ; 1.22$
b. $12.30 \% ; 1.28$
c. $12.92 \% ; 1.34$
d. $13.56 \% ; 1.41$
e. $14.24 \% ; 1.48$

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Definitions:

Foreclosure

The legal process by which a lender takes control of a property when the borrower fails to make mortgage payments.

Lienholder

A person or entity that has a legal right or claim on another's property until a debt or duty owed by the property owner is satisfied.

Security Interest

A legal claim or lien on collateral that secures the performance of an obligation, typically repayment of a debt.

Accommodation Surety

A guarantor who agrees to be responsible for someone else's debt or obligation without receiving any benefit.