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

question 133

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 21.5% and a beta of 1.70.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? Do not round your intermediate calculations.

• A) 13.98%;1.28
• B) 12.29%;1.48
• C) 12.41%;1.56
• D) 12.05%;1.25
• E) 9.40%;1.34

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Definitions:

Short-Run Supply

The quantity of goods and services that producers are willing and able to offer for sale at different prices over a short period, during which at least one input is fixed.

Long-Run Supply

The total quantity of goods or services that a market can produce and provide over a long period, considering all relevant input adjustments.

Lowest Price

The minimum cost at which a product or service is offered in the market.

Short Run

A period of time in economics during which at least one input, usually capital, is fixed and cannot be changed.