A mutual fund manager has a

$26

million portfolio (e.g., portfolio A) with a beta of 1.1 . The risk-free rate is

5.3%

, and the market risk premium is

7%

. The manager expects to receive an additional $29 million, which they plan to invest in additional stocks (e.g., portfolio B). After investing the additional funds and forming a bigger portfolio by combining portfolio

A

and

B

, they want the combined fund's required and expected return to be

16%

.\ The new combined portfolio of has a total value of 55 million

(

)

=

(

$26+$29)

.\ a. Calculate the expected return of the

$26

million portfolio, portfolio

A

.

7. A mutual fund manager has a $26 million portfolio (e.g., portfolio A) with a beta of 1.1 . The risk-free rate is 5.3%, and the market risk premium is 7%. The manager expects to receive an additional \$29 million, which they plan to invest in additional stocks (e.g., portfolio B). After investing the additional funds and forming a bigger portfolio by combining portfolio A and B, they want the combined fund's required and expected return to be 16%. The new combined portfolio of has a total value of 55 million (=$26+$29). a. Calculate the expected return of the $26 million portfolio, portfolio A