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Problem:

Your portfolio is diversified. It has an expected return of 11.0% and a beta of 1.10. You want to add 300 shares of Kraft Foods Inc at $40 a share to your portfolio. Kraft Foods Inc has an expected return of 9.0% and a beta of 0.80. The total value of your current portfolio without Kraft is $45,000.

Required:

Question 1: Calculate the expected return on the portfolio after the purchase of the Kraft Foods Inc's stock?

Note: Provide support for your rationale.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91163413

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