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Question
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
Answer
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