A mutual fund manager has a $20 million portfolio with a beta of 2.7. The risk-free rate is 5.5%, and the market risk premium is 7%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 23%. What should be the average beta of the new stocks added to the portfolio? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to one decimal place.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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9. Problem 8.17 (Portfolio Beta)
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Problem Walk-Through
A mutual fund manager has a $20 million portfolio with a beta of 2.7. The risk-free rate is 5.5%, and the market risk premium is 7%. The manager expects to receive an additional
$5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 23%. What should be the average beta of
the new stocks added to the portfolio? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to one decimal place.
Transcribed Image Text:9. Problem 8.17 (Portfolio Beta) еВook Problem Walk-Through A mutual fund manager has a $20 million portfolio with a beta of 2.7. The risk-free rate is 5.5%, and the market risk premium is 7%. The manager expects to receive an additional $5 million, which she plans to invest in a number of stocks. After investing the additional funds, she wants the fund's required return to be 23%. What should be the average beta of the new stocks added to the portfolio? Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to one decimal place.
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