A Mutual Fund Manager Has a $20 Million Portfolio with a Beta

question 133

Multiple Choice

A mutual fund manager has a $20 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 $25.50 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?

• A)1.73
• B)1.82
• C)1.91
• D)2.00

---

Definitions:

External Influences

Factors outside of an individual that affect their attitudes, decisions, and behaviors, including cultural, social, and environmental forces.

Profit Sharing

A business strategy where employees receive a share of the company's profits in addition to their regular salary.

Cost Savings

Reduction of expenses achieved through efficiency improvements, elimination of waste, or negotiation of lower prices.

Core Dimensions

Fundamental aspects or elements that define the structure or essence of a subject or system.