1. You are a manger of the Lowell Fund and manage a portfolio of $21 million. Your portfolio has a beta of 1.2 and required return of 12 percent. You receive $4 million additional to invest in the portfolio, and you invest it in a stock with a beta of 1.6. The risk-free rate is 5 percent. What is the required return on the new portfolio? (Hint: Calculate weighted average beta after new capital investment.)
2. A.3.81%
3. B.5.80%
4. C.1.26%
5. D.10.78%
6. E.9.42%
7. F.12.37%

3 points

QUESTION 5

1. Use the following information for this and the next question.
3. The rate of return on the risk-free asset is 3 percent.What is the expected return of the overall stock market if the market risk premium is 5 percent?
4. A.18.1%
5. B.10.9%
6. C.8.0%
7. D.13.7%
8. E.10.0%
9. F.8.9%

3 points

QUESTION 6

1. Continuing from the previous problem, note that BFA Inc. has a beta of 1.3. What is the required rate of return for the BFA Inc.?
2. A.10.78%
3. B.12.96%
4. C.9.50%
5. D.7.42%
6. E.12.37%
7. F.13.81%