Assume That You Manage a $10

question 46

Multiple Choice

Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required return.The risk-free rate is 4.20%.You now receive another $5.00 million,which you invest in stocks with an average beta of 0.65.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.)

• A)8.83%
• B)9.05%
• C)9.27%
• D)9.51%
• E)9.74%

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Definitions:

Producer Surplus

The difference between what producers are willing to sell a good for and the price they actually receive.

Trade

The trade of goods, services, or both among two or more entities, either within a single economy or across different ones.

Producer Surplus

The difference between what producers are willing to accept for a good or service and what they actually receive.

Trade

The exchange of goods, services, or both between two or more parties, either within a country or between countries.