The $10.00 million mutual fund Henry manages has a beta of 1.05 and a 9.50% required return.
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Question:
The $10.00 million mutual fund Henry manages has a beta of 1.05 and a 9.50% required return. The risk-free rate is 4.20%. Henry now receives another $13.50 million, which he invests in stocks with an average beta of 0.65. What is the required rate of return on the new portfolio? (Hint:You must first find the market risk premium, then find the new portfolio beta.)
Select the correct answer.
a. 8.42%b. 8.58%c. 8.34%d. 8.26%e. 8.50%
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