What should be the average beta of the new stocks

Assignment Help Finance Basics
Reference no: EM133070303

A mutual fund manager has a $20 million portfolio with a beta of 2.9. The risk-free rate is 4.5%, and the market risk premium is 5%. 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 17%. 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.

Reference no: EM133070303

Questions Cloud

Explain why the net buying conditional on previous day : Explain why the net buying conditional on previous day's return differ between individuals investors (Panel A) and institutional investors (Panel B)?
Questions about earnings announcement : a). When examining return reactions to earnings announcements we focused on the earnings surprise. Describe one way to define the earnings surprise.
Calculate the profit over the whole period : The current value of an S&R futures is 1000$. You buy 50 futures on the S&R and the contract size is 500$. The margin is settled on a weekly basis and the margi
Discuss the purpose of the police service : Discuss the purpose of the police service and how it is created to uphold the law fairly and firmly; to prevent crime; to pursue and bring to justice
What should be the average beta of the new stocks : A mutual fund manager has a $20 million portfolio with a beta of 2.9. The risk-free rate is 4.5%, and the market risk premium is 5%. The manager expects to rece
Comparative criminal : Discuss the purpose of the police service and how it is created to uphold the law fairly and firmly; to prevent crime;
Coupon rate for the bond : A 30-year corporate bond with interest rate of 2.5% is traded at $950. Please estimate the coupon rate for the bond given par value=$1,000.
What is expected of the impact of lower : According to the expected inflation hypothesis, what is expected of the impact of lower-than-expected money supply shock on the stock market?
Reduce the value of gross estate : 1. Rufus, a wealthy widower, intends to gift property to his daughter, Jade, to reduce the value of his gross estate. Which property is best for Rufus to keep?

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the new margin on the account

Megan bought 200 shares of stock at a price of $10 a share. She used her margin account with a 70% initial margin to make the purchase.

  Find the minimum annual earnings before taxes

Hudson Corporation needs a machine that costs $60,000 and is expected to run for 5 years. Hudson will depreciate it completely in 4 years on a straight-line basis. The tax rate of the company is 33%, and the proper discount rate is 13%. Find th..

  Using the du pont identity y3k inc has sales of 4800 total

using the du pont identity y3k inc. has sales of 4800 total assets of 2685 and a debt-equity ratio of 1.20. if its

  Shares of common stock outstanding

The required rate of return on this investment is 18%. MMP has debt of $2,000,000, preferred stock of $1,000,000 and 400,000 shares of common stock outstanding. What is each share of common worth today?

  Estimate sales growth rates

If you want to start a business, what long-term investments do you plan to choose and what assumptions and methods do you use to estimate your sales growth rate

  Profitability index of the investment

You were offered an investment with returns of $2,579 in year 1, $4,681 in year 2, and $5,043 in year 3. The investment will cost you $6,247 today. If the appropriate Cost of Capital (quoted interest rate) is 8.1%, what is the Profitability Inde..

  What is the degree of combined leverage at both sales level

United snack company sells 50 pound bags of peanuts to university dormitories for $10 a bag the fixed costs of this operation are 80 000 while the variable cost of peanuts are $.10 per round.

  Estimate the value of the equity in the firm and the value

a) Estimate the value of the firm. b) Estimate the value of the equity in the firm and the value per share.

  The estimated economic life of the machine

On January 1, Year 8, Von Company entered into two non-cancellable leases of new machines for use in its manufacturing operations. The first lease does not contain a bargain purchase option, and the lease term is equal to 80% of the estimated economi..

  What is the company current value

George owns 100% of equity of a company. . If George works 6 hours per day, the company's EBIT will be 335,000 dollars per year, in perpetuity. If, instead, he

  What is the ggap effect

You deposit US$ 10 000 annually into a life insurance fund for the next 10 years, after which time you plan to retire

  Determine the capitalized cost for maintaining the statue

It is estimated that the annual maintenance cost of a statue erected in front of a public building in a state capital would be $2,500.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd