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Sati [7]
3 years ago
7

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 proces

s 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.
Business
1 answer:
Oksanka [162]3 years ago
7 0

Answer:

Explanation:

Investment value in alpha = $10,000

Weight of alpha in total investment = 10%

Expected return:

= 11%×0.90+21.5%×0.10

= 12.05%

Beta of portfolio:

= 1.2×0.90+1.7×0.10

= 1.08+ 0.17

=1.25

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