Problem:
A mutual fund manager has a $20 million portfolio with a beta of 0.85. The risk-free rate is 7.75%, and the market risk premium is 5.0%. 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 14%.
Required:
Question: What should be the average beta of the new stocks added to the portfolio?
Note: Please provide full description.