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:

Conversion Costs

Costs incurred during the transformation of raw materials into finished goods, including both direct labor costs and manufacturing overhead.

Equivalent Unit

A computation used in process costing that converts partially completed units of production into a number of fully completed units.

Process Costing

A costing method used for homogenous products, which assigns costs to units of product based on the process they go through.

Equivalent Unit

A measure used in accounting to express the amount of work done by employees or the amount of goods produced in terms of fully completed units.