A portfolio manager is holding the following investments in her portfolio:

Stock	Investment	Beta
1	$300 million	0.7
2	200 million	1.0
3	500 million	1.6

The risk-free rate is 5 percent and the portfolio has a required return of 11.655 percent. The manager is thinking about selling all of her holdings of Stock 3, and instead investing in Stock 4, which has a beta of 0.9. If she were to do this, what would be the new portfolio's required rate of return?

• A.

  9.73 percent

• B.

  9.91 percent

• C. 10.24 percent
• D.

  7.81 percent

• E.

  11.09 percent