Your Mother's Well-Diversified Portfolio Has an Expected Return of 12

question 27

Multiple Choice

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?
Rp 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

---

Definitions:

Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's cost.

Withdraw

The act of removing funds from a bank account or the cessation of investment in a particular asset or undertaking.

Retire

The act of withdrawing from one's position or profession, often marking the end of one's career.

Invested Funds

Money or capital that has been invested in a business, project, or financial asset, often seeking to generate returns.