The $1000 Million Mutual Fund Henry Manages Has a Beta of of 1.05

question 66

Multiple Choice

The $10.00 million mutual fund Henry manages has a beta of 1.05 and a 9.50% required return.The risk-free rate is 4.20%.Henry now receives another $5.00 million, which he invests 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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