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

question 20

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 $29.50 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? Do not round your intermediate calculations.

• A) 2.08
• B) 2.18
• C) 2.60
• D) 1.66
• E) 1.87

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