What will be the required return on your new portfolio

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You have been managing a $5 million portfolio that has a beta of 1.25 and a required rate of return of 12%. The current risk-free rate is 5.25%.

1. What is the market risk premium from the CAPM?

A. 0.054

B. 0.056

C. 0.058

D. 0.060

2. Assume that you receive another $500,000 ($0.5 million) and invest the money in a stock with a beta of 1.00. What is the portfolio beta of your new portfolio ($5.5 million in total)?

A. 1.2187

B. 1.2245

C. 1.2273

D. 1.2360

3. What will be the required return on your new portfolio?

A. 11.50%

B. 11.65%

C. 11.72%

D. 11.88%

Reference no: EM131999407

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