What must the average beta of the new stocks

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Reference no: EM131922873

Topic: Capital Planning Evaluation Techniques

Assignment Description

You have been asked by the director of finance to put together a plan to invest in other companies. Your plan will manage a mutual fund with a $20 million portfolio with a beta of 1.50. Assume that the risk-free rate is 4.50%, and the market risk premium is 5.50%. You expect to receive an additional $5 million, which you plan to invest in a number of stocks. After investing the additional funds, you want the fund's required return to be 13%.

What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return?

In a Word document, explain the steps you used to arrive at your answers.

What does your calculated beta mean to UPC?

Should UPC be concerned about the use of betas in making investment decisions?

Reference no: EM131922873

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Reviews

len1922873

3/31/2018 4:48:51 AM

Critical thinking: Position is well-justified, there is logical flow, and there are examples. 20% Structure: Includes introduction and conclusion, proper paragraph format, and reads as a polished, academic paper or professional presentation, as appropriate for the required assignment deliverable. 10% Mechanical: No spelling, grammatical, or punctuation errors. 10% APA: Deliverable is cited properly according to the APA Publication Manual (6th ed.). 5%

len1922873

3/31/2018 4:48:44 AM

Individual Project Rubric Grading Criteria Percentage Deliverable requirements addressed; understanding of material and writer's message and intent are clear. 40% Calculation methods, where required, are contextually appropriate, fully explained, and presented in a manner that is easy to understand. 10% External research incorporated in the paper, if any, supportsthe writer's position and is properly acknowledged, and cited direct quotations may not exceed 10% of the word count of the body of the assignment deliverable (excluding title page, abstract, table of contents, tables, exhibits, appendices, and reference pages). Inclusion of plagiarized content will not be tolerated and may result in adverse academic consequences. 5%

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