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 4.20%.You now receive another $5.00 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.)

A) 8.83%
B) 9.05%
C) 9.27%
D) 9.51%
E) 9.74%