What must the average beta of the new stocks be to achieve

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Problem 1: Hazel Morrison, 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%. Hazel expects to receive an additional $20.50 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?

Select the correct answer.

a. 2.27
b. 2.35
c. 2.31
d. 2.39
e. 2.43

Reference no: EM132965148

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