Suppose you held a diversified portfolio consisting of 10 different common stocks, investing $500 in each stock. The portfolios beta is 1.9. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 0.8 for $500 and use the proceeds to buy another stock with a beta of 1.25. What would your portfolios new beta be?

a) 3.865

b) 1.074

c) 2.025

d) 4.2

e) None of the above

Your Uncle is about to retire, and he wants to buy an annuity that will provide him with $85,000 of income a year for 25 years, with the first payment coming immediately. The going rate on such annuities is 15%. How much would it cost him to buy the annuity today? *

a. $1,063,968

b. $1,119,966

c. $1,178,912

d. $1,240,960

e. None of the above