5. Douglas is the manager of a $5 million investment fund. The fund consists of five stocks with the following investments and betas: Stock A B D Investment $1,000,000 1,800,000 1,200,000 700,000 300,000 Beta 0.40 1.45 -0.85 0 2.20 E If the risk-free rate is 4% and the markets required rate of return is 12.6%, what is the investment fund's required rate of return? (Hint: find the portfolio beta first and then apply the CAPM formula) (6 points) 6. Tom is managing a $10 million portfolio that has a beta of 1.25 and a required rate of return of 12.6%. The current risk-free rate is 4.7%. Assume that Tom receives another $2 million. If Don invests the money in a stock with a beta of 0.85, what will be the required return on Tom's 12 million portfolio? (Hint: find the market risk premium (rm-rrr) first using the information of the original portfolio, next find the new portfolio beta and then the required rate of return). (7 points)