You Are an Investor in Common Stock, and You Currently

question 4

Multiple Choice

You are an investor in common stock, and you currently hold a well-diversified portfolio which has an expected return of 12 percent, a beta of 1.2, and a total value of $9,000.You plan to increase your portfolio by buying 100 shares of AT&E at $10 a share.AT&E has an expected return of 20 percent with a beta of 2.0.What will be the expected return and the beta of your portfolio after you purchase the new stock?

• A) = 20.0%; β_p = 2.00
• B) = 12.8%; β_p = 1.28
• C) = 12.0%; β_p = 1.20
• D) = 13.2%; β_p = 1.40
• E) = 14.0%; β_p = 1.32

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