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?Group of answer choices~r(sub p) = 20.0%; βp = 2.00~r(sub p) = 12.8%; βp = 1.28~r(sub p) = 12.0%; βp = 1.20~r(sub p) = 13.2%; βp = 1.40~r(sub p) = 14.0%; βp = 1.32

Expected return is the return which is the return which has been expected by the investor to earn…

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10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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?

Group of answer choices

~r(sub p) = 20.0%; βp = 2.00

~r(sub p) = 12.8%; βp = 1.28

~r(sub p) = 12.0%; βp = 1.20

~r(sub p) = 13.2%; βp = 1.40

~r(sub p) = 14.0%; βp = 1.32

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