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 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.
A. 13.98%; 1.28
B. 12.29%; 1.48
C. 12.41%; 1.56
D. 12.05%; 1.25
E. 9.40%; 1.34
Answer: D
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