Assume That You Hold a Well-Diversified Portfolio That Has an Expected

question 27

Multiple Choice

Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20.You are in the process of buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio.Alpha has an expected return of 13.0% and a beta of 1.50.The total value of your current portfolio is $90,000.What will the expected return and beta on the portfolio be after the purchase of the Alpha stock?

• A)10.64%; 1.17
• B)11.20%; 1.23
• C)11.76%; 1.29
• D)12.35%; 1.36
• E)12.97%; 1.42

---

Definitions:

T Distribution

A type of probability distribution that is symmetric and bell-shaped but has heavier tails than the normal distribution, used especially in small sample analysis.

Degrees of Freedom

The count of distinct values or quantities that can change during an analysis while still adhering to all constraints.

Normal Distribution

This refers to a probability distribution characterized by its symmetry about the mean, highlighting that data closer to the mean are encountered more frequently than data far from the mean.

Degrees of Freedom

The number of independent pieces of information used in the calculation of a statistic, often representing the number of values free to vary.