Assume That You Manage a $10

question 94

Multiple Choice

Assume that you manage a $10.75 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 $5.25 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)9.07%
• B)9.30%
• C)9.53%
• D)9.77%

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Definitions:

Significant Change

A statistical term used to describe a change in data that is likely not due to random chance alone.

Expected Cell Count

In contingency table analysis, the theoretical number of observations that are expected in each cell of the table under the assumption of independence.

Test Statistic

A standardized value used in statistical hypothesis testing to determine whether to reject the null hypothesis.

Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect is present between datasets or that a parameter equals a specific value.