Question

17) A mutual fund manager has a $20 million portfolio with a beta of 0.95. The risk-free rate is 3.75%, and the market risk premium is 7.0%. 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 13%. What should be the average beta of the new stocks added to the portfolio? Do not round intermediate calculations. Round your answer to two decimal places. Enter a negative answer with a minus sign.

Answer #1

Before investment:

Value of Portfolio = $20 million

Beta (old) = 0.95

After investment:

Value of Portfolio = $25 million

Required Return = 13%

Required Return = Risk-free Rate + Beta (new) * Market Risk
Premium

13.00% = 3.75% + Beta (new) * 7.00%

1.32 = Beta (new)

Beta (new) = Weight of Old Portfolio * Beta of Old Portfolio +
Weight of New Stock * Beta of New Stock

1.32 = ($20 million / $25 million) * 0.95 + ($5 million / $25
million) * Beta of New Stock

1.32 = 0.76 + 0.20 * Beta of New Stock

0.56 = 0.20 * Beta of New Stock

Beta of New Stock = 2.80

So, average beta of the new stocks is 2.80

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....

Problem 8.17: Portfolio Beta A mutual fund manager has a $20
million portfolio with a beta of 0.75. The risk-free rate is 3.25%,
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 20%. What should be the average beta of the
new stocks added to the portfolio? Do not round...

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.

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...

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...

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...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 13 minutes ago

asked 17 minutes ago

asked 22 minutes ago

asked 29 minutes ago

asked 33 minutes ago

asked 49 minutes ago

asked 52 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago