Question

A mutual fund manager has a $20 million portfolio with a beta of 1.4. The risk-free rate is 5.5%, and the market risk premium is 9%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 19%. What should be the average beta of the new stocks added to the portfolio? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to one decimal place.

Answer #1

_______________________________

_______________________________

Expected Return of old portfolio = Rf + beta * Market Risk Premium

= 5.5% + 1.4 * 9

= 18.1%

Expected Return of new portfolio = 18.10% * 20mn / 25 mn + Return of additional Funds * 5 / 25

19% = 14.48% + Return of additional Funds * 0.20

Return of additional Funds = 19% - 14.48% / 0.20

Return of additional Funds = 22.6%

Return of Additional Funds = Rf + beta * Risk Premium

22.60% = 5.5% + beta * 9

beta = 22.60% - 5.5% / 9

beta = 1.90

**NOTE: Do upvote the answer, if this was
helpful.**

**NOTE:** **Please don't downvote directly.
In case of query, I will solve it in comment section in no
time.**

A mutual fund manager has a $20 million portfolio with a beta of
1.4. The risk-free rate is 4.5%, and the market risk premium is 5%.
The manager expects to receive an additional $5 million, which she
plans to invest in a number of stocks. After investing the
additional funds, she wants the fund's required return to be 12%.
What should be the average beta of the new stocks added to the
portfolio? Negative value, if any, should be indicated...

A mutual fund manager has a $20 million portfolio with a beta of
1.40. The risk-free rate is 5.75%, and the market risk premium is
5.5%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fund's required return to be
14%. What should be the average beta of the new stocks added to the
portfolio? Negative value, if any, should be indicated...

A mutual fund manager has a $20 million portfolio with a beta of
1.75. The risk-free rate is 5.50%, and the market risk premium is
5.0%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fund's required return to be
16%. What should be the average beta of the new stocks added to the
portfolio? Do not round intermediate calculations. Round your...

A mutual fund manager has a $20 million portfolio with a beta of
0.75. The risk-free rate is 4.25%, and the market risk premium is
4.5%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fund's required return to be
16%. What should be the average beta of the new stocks added to the
portfolio? Do not round intermediate calculations. Round your...

A mutual fund manager has a $20 million portfolio with a beta of
1.35. The risk-free rate is 5.75%, and the market risk premium is
6.5%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fund's required return to be
12%. What should be the average beta of the new stocks added to the
portfolio? Do not round intermediate calculations. Round your...

A mutual fund manager has a $20 million portfolio with
a beta of 1.55. The risk-free rate is 3.00%, and the market risk
premium is 4.5%. The manager expects to receive an
additional $5 million, which she plans to invest in a number of
stocks. After investing the additional funds, she wants
the fund's required return to be 18%. What should be
the average beta of the new stocks added to the portfolio? Round
your answer to two decimal places.

A mutual fund manager has a $20 million portfolio with a beta of
1.5. The risk-free rate is 4.5%, and the market risk premium is
5.5%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fundâ€™s required return to be
13%. What should be the average beta of the new stocks added to the
portfolio?

eBook A mutual fund manager has a $20 million portfolio with a
beta of 1.60. The risk-free rate is 6.00%, and the market risk
premium is 6.0%. The manager expects to receive an additional $5
million, which she plans to invest in a number of stocks. After
investing the additional funds, she wants the fund's required
return to be 19%. What should be the average beta of the new stocks
added to the portfolio? Negative value, if any, should be...

PORTFOLIO BETA
A mutual fund manager has a $20 million portfolio with a beta of
1.20. The risk-free rate is 5.00%, and the market risk premium is
6.0%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fund's required return to be
12%. What should be the average beta of the new stocks added to the
portfolio? Do not round intermediate calculations....

PORTFOLIO BETA
A mutual fund manager has a $20 million portfolio with a beta of
1.50. The risk-free rate is 6.50%, and the market risk premium is
4.5%. The manager expects to receive an additional $5 million,
which she plans to invest in a number of stocks. After investing
the additional funds, she wants the fund's required return to be
17%. What should be the average beta of the new stocks added to the
portfolio? Do not round intermediate calculations....

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 11 minutes ago

asked 35 minutes ago

asked 38 minutes ago

asked 40 minutes ago

asked 42 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago