Problem:
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 (RPM) 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%.
Required:
Question: What must the average beta of the new stocks be in order to achieve the target required rate of return?
Note: Please show guided help with steps and answer.