Assume That You Manage a $10

question 37

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 2.20%.You now receive another $14.50 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. ) Do not round your intermediate calculations.

• A) 6.81%
• B) 7.82%
• C) 6.56%
• D) 7.31%
• E) 6.31%

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Definitions:

Regression

A statistical technique that measures the extent and nature of the association between a dependent variable and one or more independent variables.

Quantitative Models

Mathematical or statistical models used to represent a real-world phenomenon, aiding in decision-making and predictions based on quantitative data.

Degree Of Uncertainty

The extent to which outcomes are unpredictable in a given scenario, affecting decision-making processes and risk management.

Delphi Technique

A structured communication method that uses a panel of experts to reach a consensus on a particular issue through rounds of questionnaires and feedback.