A portfolio manager has a $10 million portfolio, which consists of $1 million invested in 10 separate stocks. The portfolio beta is 1.2. The risk-free rate is 5% and the market risk premium (rM-rRF) is 6%.

a). What is the portfolios required return?

b). The manager sells one of the stocks in her portfolio for $1 million. The stock she sold has a beta of 0.9. She takes the $1 million and uses the money to purchase a new stock that has a beta of 1.6. What is the required return of her portfolio after purchasing this new stock?