What should be the average beta of the new stocks added to


A mutual fund manager has a $20 million portfolio with a beta of 0.95. The risk-free rate is 3.75%, and the market risk premium is 5.6%. 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’s required return to be 9.75%. What should be the average beta of the new stocks added to the portfolio? Hint: calculate the beta of the portfolio AFTER the additional investment, then use that to calculate the average beta of the additional investment. You must show your work to receive full credit.

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Financial Management: What should be the average beta of the new stocks added to
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