Problem:
A manager is holding a portfolio:
Stock Amount Invested Beta
1 300,000 .6
2 300,000 1.0
3 500,000 1.4
4 500,000 1.8
The risk free rate is 6% and the portfolio's required rate of return is 12.5%. The manager would like to sell all of the holdings of stock 1 and use the proceeds to buy more shares of stock 4. What would be the portfolio's required rate of return with this change?