Ivan Knobel holds a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. He is in the process of buying 1,000 shares of Syngine Corp at $10 a share and adding it to his portfolio. Syngine has an expected return of 13.0% and a beta of 1.50. The total value of Ivan's current portfolio is $90,000. What will the expected return and beta on the portfolio be after the purchase of the Syngine stock?

Expected return = 11.2%

Beta = 1.23  

Solution:

The estimated post-purchase return on the portfolio seems to be the weighted average return on the Syngine stock as well as the pre-purchase return on the portfolio, determined as follows:

Post-purchase portfolio return

= / x Syngine stock return +

x Pre-purchase return

= [(1,000 x 10)/(1,000 x 10 + 90,000)] x 13% +  [(90,000)/(1,000 x 10 + 90,000)] x 11%

Post-purchase portfolio return  = 11.2%

Using the same equation, the post-purchase beta is estimated as follows:

Post-purchase portfolio beta = [(1,000 x 10)/(1,000 x 10 + 90,000)] x 1.5 +  [(90,000)/(1,000 x 10 + 90,000)] x 1.2

Post-purchase portfolio beta = 1.23

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

your welcome leave a rate and a < 3