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

question 43

Multiple Choice

A 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

---

Definitions:

Exchange Rate

The price of one country's currency in terms of another currency, determining how much foreign currency can be bought with a unit of the domestic currency or vice versa.

Cognac

A type of brandy named after the town of Cognac in France, known for its strict production methods and aging process.

Handbags

Fashion accessories designed for carrying personal items, whose market dynamics can illustrate economic concepts of demand, supply, and price elasticity.

Exchange Rate

The valuation of one currency in the context of exchanging it for another.