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 20.5% and a beta of 0.80. 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?

Answers:

11.23% and 0.95

12.07% and 1.32

10.04% and 0.88

11.95% and 1.16

14.22% and 1.00