. A mutual fund has $10 million in investments, a beta of 1.05 and a 9.5% required return. The risk-free rate is 4.2%.

a. Apply the capital asset pricing model to calculate the market rate of return.

b. Suppose the fund receives an additional $5 million in investment assets. These new assets are invested in stocks with an average beta of 0.65. Calculate beta for the combined ($15 million) portfolio.

c. Calculate the required rate of return for the combined ($15 million) portfolio.