A stock that you are interested in has a beta of 5. The total value of your portfolio is

$200,000 and you decide to invest another $50,000 in this stock.

a. The current beta of your portfolio is 2.5. What will be the beta of your new portfolio?

b. The risk-free rate is 6% and the expected return on the market is 15%. What is the expected

return on your new portfolio