A mutual fund manager has a $100 million portfolio with a be…
A mutual fund manager has a $100 million portfolio with a beta of 1.00. The risk-free rate is 4%, and the market risk premium is 6%. The manager expects to receive an additional $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 11.00%. What must the average beta of the new stocks be to achieve the target required rate of return?