A mutual fund manager has a $40.00 million portfolio with a beta of 1.00. The risk-free rate is 4.25%, and the market risk premium is 6.00%. The manager expects to receive an additional $29.50 million which she plans to invest in additional stocks. After investing the additional funds, she wants the fund's required and expected return to be 13.00%. What must the average beta of the new stocks be to achieve the target required rate of return? Do not round your intermediate calculations. (show the work on a scrap paper) a. 2.08 b. 2.18 c. 2.60 d. 1.66 e. 1.87
A mutual fund manager has a $40.00 million portfolio with a beta of 1.00. The risk-free rate is 4.25%, and the market risk premium is 6.00%. The manager expects to receive an additional $29.50 million which she plans to invest in additional stocks. After investing the additional funds, she wants the fund's required and expected return to be 13.00%. What must the average beta of the new stocks be to achieve the target required rate of return? Do not round your intermediate calculations. (show the work on a scrap paper) a. 2.08 b. 2.18 c. 2.60 d. 1.66 e. 1.87
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 5P
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Question
A mutual fund manager has a $40.00 million portfolio with a beta of 1.00. The risk-free rate is 4.25%, and the market risk premium is 6.00%. The manager expects to receive an additional $29.50 million which she plans to invest in additional stocks. After investing the additional funds, she wants the fund's required and expected return to be 13.00%. What must the average beta of the new stocks be to achieve the target required
|
a. |
2.08 |
|
b. |
2.18 |
|
c. |
2.60 |
|
d. |
1.66 |
|
e. |
1.87
|
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