Mutual Fund Manager Has a $40 Million Portfolio with a Beta

question 103

Multiple Choice

mutual fund manager has a $40 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 $60 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?

• A)1.68
• B)1.76
• C)1.85
• D)1.94
• E)2.04

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Definitions:

Combination Lock

A combination lock is a type of lock that opens upon entering a sequence of symbols, typically numbers in a specific order.

Reinforcement

In behavioral psychology, a consequence that will strengthen an organism's future behavior whenever that behavior is preceded by a specific antecedent stimulus.

Discrimination

Unfair or prejudicial treatment of individuals or groups based on characteristics such as race, gender, age, or sexual orientation.

Operant Conditioning

A learning framework through which a behavior's strength is altered by either reinforcement techniques or punitive actions.