Assume that you manage a $10.00 million mutual fund that has a beta of 1.25 and a 9.50% required return. The risk-free rate is 2.20%. You now receive another $15.00 million, which you invest in stocks with an average beta of 0.80. What is the required rate of return on the new portfolio? (Hint: You must first find the market risk premium, then find the new portfolio beta.) Do not round your intermediate calculations. a. 9.17% b. 8.71% c. 7.92% d. 7.45% e. 9.65%
Assume that you manage a $10.00 million mutual fund that has a beta of 1.25 and a 9.50% required return. The risk-free rate is 2.20%. You now receive another $15.00 million, which you invest in stocks with an average beta of 0.80. What is the required rate of return on the new portfolio? (Hint: You must first find the market risk premium, then find the new portfolio beta.) Do not round your intermediate calculations. a. 9.17% b. 8.71% c. 7.92% d. 7.45% e. 9.65%
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 25P
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Assume that you manage a $10.00 million mutual fund that has a beta of 1.25 and a 9.50% required return. The risk-free rate is 2.20%. You now receive another $15.00 million, which you invest in stocks with an average beta of 0.80. What is the required rate of return on the new portfolio? (Hint: You must first find the market risk premium, then find the new portfolio beta.) Do not round your intermediate calculations.
a. 9.17%
b. 8.71%
c. 7.92%
d. 7.45%
e. 9.65%
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