Problem 2: A mutual fund manager has a $40 million portfolio with a beta of 1.00. The risk-free rate is 4.25%, and the market risk premium is 6.00%. The manager expects to receive an additional $60 million, which she plans to invest in additional stocks. After investing the additional funds, she wants the fund's required and expected return to be 13.00%. What must the average beta of the new stocks be to achieve the target required rate of return?

Problem 2: A mutual fund manager has a $40 million portfolio with a beta of 1.00. The risk-free rate is 4.25%, and the market risk premium is 6.00%. The manager expects to receive an additional $60 million, which she plans to invest in additional stocks. After investing the additional funds, she wants the fund's required and expected return to be 13.00%. What must the average beta of the new stocks be to achieve the target required rate of return?

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

Section: Chapter Questions

Problem 1PS

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Suppose you are the money manager of a $5.08 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta $ 440,000 A B C D 0.75 If the market's required rate of return is 10% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. 500,000 1,140,000 3,000,000 1.50 (0.50 ) 1.25
5. You manage an equity fund with an expected risk premium of 8% and an expected standard deviation of 10%. The rate on Treasury bills is 5%. Your client chooses to invest OMR70,000 of her portfolio in your equity fund and OMR30,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client's portfolio?
Suppose you are the money manager of a $4.42 million investment fund. The fund consists of four stocks with the following investments and betas: Stock A B C D Beta Investment $360,000 600,000 1,160,000 1.50 (0.50) 1.25 2,300,000 0.75 If the market's required rate of return is 13% and the risk-free rate is 5%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
So.8
5. Problem 8.07 (Portfolio Required Return) Suppose you are the money manager of a $4.48 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A S 340,000 1.50 B 700,000 (0.50) C 940,000 1.25 D 2,500,000 0.75 If the market's required rate of return is 11% and the risk - free rate is 5%, what is the fund's what required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
Suppose you manage a $4 million fund that consists of four stocks with the following investments: Beta Stock A 1.50 B -0.50 1.25 C D 0.75 If the market's required rate of return is 14% and the risk-free rate is 7%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. Investment $400,000 1,000,000 1,600,000 1,000,000 %
8. You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of 14%. The rate on Treasury bills is 6%. Your client chooses to invest $60,000 of her portfolio in your equity fund and $40,000 in a T-bill money market fund. What are the expected return and standard deviation of return on your client's portfolio? 9. What is the reward-to-volatility (Sharpe) ratio for the equity fund in CFA Problem 8?
Suppose you are the money manager of a $4.86 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 280,000 1.50 В 700,000 (0.50) 1,380,000 1.25 2,500,000 0.75 If the market's required rate of return is 11% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. 22.65 %
D Suppose you are the money manager of a $4.28 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 340,000 1.50 B 700,000 C D 1,040,000 2,200,000 (0.50) 1.25 0.75 If the market's required rate of return is 12% and the risk-free rate is 5%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
A mutual fund manager has a $20 million portfolio with a beta of 0.75. The risk-free rate is 3.75%, and the market risk premium is 7.0%. 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 12%. 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 two decimal places.
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.
Suppose you are the money manager of a $5.22 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 460,000 1.50 B 800,000 (0.50) C 1,260,000 1.25 D 2,700,000 0.75 If the market's required rate of return is 8% and the risk-free rate is 4%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %

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