Pension fund that invests in relatively low-risk investments

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You are running a pension fund that invests in relatively low-risk investments. The fund had $50 million in assets and a portfolio beta of 0.4. Your manager says that she wants you to hit a target return of 7% and will give you an additional $25 million to invest to hit this target. The risk-free rate is 3% and the market risk premium is 8%. Given your goal of 7% return what should be the average beta of the stocks that you add to the portfolio? Note: you are keeping the stocks ($50 million) in which you’re currently invested.

Reference no: EM131896916

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