A mutual fund manager has a $40.00 million portfolio with a beta of 1.00. The risk-free rate is 4.25%, and the market risk premium is 6.00%. The manager expects to receive an additional $29.50 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? Do not round your intermediate calculations. (show the work on a scrap paper) a. 2.08 b. 2.18 c. 2.60 d. 1.66 e. 1.87

A mutual fund manager has a $40.00 million portfolio with a beta of 1.00. The risk-free rate is 4.25%, and the market risk premium is 6.00%. The manager expects to receive an additional $29.50 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? Do not round your intermediate calculations. (show the work on a scrap paper) a. 2.08 b. 2.18 c. 2.60 d. 1.66 e. 1.87

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 5P

See similar textbooks

Similar questions

A company's fund manager has a P20,000,000 portfolio with a beta of 0.75. The risk-free rate is 4.50% and the market risk premium is 5.00%.The manager expects to receive an additional P30,000,000, which she plans to invest in several stocks. After investing the additional funds, she wants the fund's required return to be 9.50%. 1. What is the required rate of return on the initial P20M investment? 2. What is the rate of return of all risky and risk-free securities? 3. To achieve the fund manager’s required return target, the funds should be invested in an investment with a beta of 4. Judge the overall riskiness of the P50M portfolio A. Aggressive B. Neutral C. Conservative
A mutual fund manager has a $450 million portfolio with a beta of 1.20. The risk-free rate is 2.5%, and the market risk premium is 5.00%. The manager expects to receive an additional $150 million which she plans to invest in several different stocks. After investing the additional funds, she wants to reduce the portfolio's risk level so that once the additional funds are invested the portfolio's required return will be 7.50%. What must the average beta of the new stocks added to the portfolio be (not the new portfolio's beta) to achieve the desired required rate of return?
A mutual fund manager has a $20 million portfolio with a beta of 1.7.The risk-free rate is 4.5%, and the market risk premium is 7%. The manager expects toreceive an additional $5 million, which she plans to invest in a number of stocks. Afterinvesting the additional funds, she wants the fund’s required return to be 15%. Whatshould be the average beta of the new stocks added to the portfolio?
A mutual fund manager has a $80 million portfolio with a beta of 2.0. The risk-free rate is 4.3%, and the market risk premium is 5.5%. The manager expects to receive an additional $20 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 14%. What should be the average beta of the new stocks added to the portfolio? options: A)0.8182 B)0.7364 C)0.8591 D)0.9000 E)0.7773
As a mutual fund manager, you have a $40.00 million portfolio with a beta of 1.20. The risk-free rate is 3.25%, and the market risk premium is 7.00%. You expect to receive an additional $10.00 million which you plan to invest in additional stocks. After investing the additional funds, you want the fund's required and expected return to be 12.00%. What must the average beta of the new stocks be to achieve the target required rate of return? Do not round your intermediate calculations.
Suppose that a mutual fund manager has a $20 million portfolio with a beta of 1.7. Also suppose that the risk free rate is 4.5% and the market risk premium is 5%. The manager expects to receive an additional $5 million, which is to be invested in a number of new stocks to add to the portfolio. After these stocks are added, the manager would like the fund's required rate of return to be 12%. For notation, let represent the required return, let RF represent the risk free rate, let b represent the beta of a group of stocks, and m represent the market return. According to the video, which equation most closely describes the security market line (SML)? OT=TRE+bx (M + TRF) O TRE-6x (rM - TRF) Or=TRF + TM-TRF ORF + bx (rM - TRF) Hint: Recall that the manager wants the new required rate of return for the portfolio to remain at 12%. Using the equation you just identified, and plugging in the relevant information, yields a beta of the portfolio, after the new stocks have been added, of…
A mutual fund manager has a $20 million portfolio with a beta of 0.75. The risk-free rate is 3.75%, and the market risk premium is 7.0%. 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 12%. 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 two decimal places.
A mutual fund manager has a $20 million portfolio with a beta of 1.7. The risk-free rate is 4.5%, and the market risk premium is 9%. 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 18%. 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.
A mutual fund manager has a 30 million portfolio with a beta of 1.5. The risk free rate is 4% and the market risk premium is 6%. 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
A manager has a $200.0 million portfolio with a beta of 1.40. The risk-free rate is 4.0%, and the market risk premium is 5.0%. The manager expects to receive an additional $50.0 million which they plan to invest in several stocks. After investing the additional funds, they wants the fund's required return to be 12%. What is the required return on their portfolio (before they receive the additional funds)? If they want the fund's required return to be 12% (after they invest the additional $50 million), what must be the beta of the new portfolio? What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return? please solve in excel.
Your Company's 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%. The manager expects to receive an additional $60 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? 20
You manage an equity fund with an expected risk premium of 14% and a standard deviation of 54%. The rate on Treasury bills is 6.8%. Your client chooses to invest $120,000 of her portfolio in your equity fund and $30,000 in a T-bill money market fund.(1) What is the expected return and standard deviation of return on your client’s portfolio?(2) What is the reward-to-volatility ratio for the equity fund?(3) What is the risk-aversion index of your client?