12. Assume that Sam manages a $20 million mutual fund that has a beta of 0.9 and a 7% required return. The risk-free rate is 6%. He now receives another $10 million, which he invests in stocks with an average beta of 0.5. What is the required rate of return on the new portfolio? A) It is the same as the expected return of the $20 million portfolio. B) The expected return of the new portfolio is 0.15% lower than $20 million portfolio OC) It could be 6.8% using CAPM model. D) Options (B) & (C) OE) None of the above 13. Jessie just won the lottery, and she must choose between two award options. She can select to receive 10 end-of year payments of $9.5 million (Option 1), or to receive 30 end-of year payments of $5.5 million (Option 2). If she thinks she can earn 7% annually, which should she choose? * A) Option 1 with present value of $66.72 million higher than Option 2's present value by $1.53 million B) Option 2 with present value $68.25 million higher than Option 1's present value by $1.53 million C) Option 1 with present value of $68.25 higher than Option 2's present value by $1.53 million D) Option 2 with present value $61 million higher than option 1's present value by $5.72 million OE) None of the above