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

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Definitions:

Multi-Partite Virus

Literally meaning “multi-part” virus; a type of computer virus that attempts to infect computers using more than one method.

Packet Sniffer

A software or hardware tool that intercepts, logs, and analyzes network packets as they are transmitted over a network, used for diagnosing network problems or for malicious activity.

Trojan Horse

A type of malware disguised as legitimate software, used by hackers to gain unauthorized access to a system.

Worm

A malicious software program that replicates itself in order to spread to other computers.