Assume That You Manage a $10

Multiple Choice

Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required return.The risk-free rate is 2.20%.You now receive another $14.50 million,which you invest 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. ) Do not round your intermediate calculations.

A) 6.81%
B) 7.82%
C) 6.56%
D) 7.31%
E) 6.31%