Assume that Sam manages a $20 million mutual fund that has a beta of 0.9 and a 7% required return. The risk-free rate is 6%. He now receives another $10 million, which he invests in stocks with an average beta of 0.5. What is the required rate of return on the new portfolio?

A) It is the same as the expected return of the $20 million portfolio.

B) The expected return of the new portfolio is 0.15% lower than $20 million portfolio.

C) It could be 6.8% using CAPM model.

D) Options (B) & (C)

E) None of the above