Calculate average beta of the new stocks

Assignment Help Finance Basics
Reference no: EM1357669

A mutual fund manager has a $20.0 million portfolio with a beta of 1.50. The risk-free rate is 4.50%, and the market risk premium is 5.50%. The manager expects to receive an additional $5.0 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 13.00%. What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return?

Reference no: EM1357669

Questions Cloud

Describe briefly a current health problem : Describe briefly a current health problem. A father racing his son has half the kinetic energy of the son, who has one-third the mass of the father. The father speeds up by 2.5 m/s and then has the same kinetic energy as the son.
Political and technological concerns : In what ways does the globalization of the economy represent a health concern for populations across the globe?
Description of any biological influences : Describe how depression could affect memory. Provide a brief description of any biological influences on the memory of individuals with depression.
Write application to calculate price of carpeting for room : The Westfield Carpet Company has asked you to write an application that calculates the price of carpeting for rectangular rooms.
Calculate average beta of the new stocks : A mutual fund manager has a 20 million dollar portfolio with a beta of 1.50. The risk-free rate is 4.50 percent, and the market risk premium is 5.50%. The manager expects to receive an additional $5 million which she plans to invest in a number of st..
Origins of communicable diseases : Describe different measures that were taken to contain or eradicate the disease and assess the role that was played by issues pertaining to water,
Adjusting journal entries for balance sheet accounts : Following are several December 31 account balances of Brookhaven Square, Inc. prior to the preparation of year-end adjusting journal entries: Briefly describe the nature of the adjusting journal entries for the accounts identified.
What is the impulse the bat delivers to the ball : A 0.144 kg baseball is pitched horizontally at +38 m/s and after it is hit by the bat it moves horizontally at -38 m/s.
Elucidate how many units of the good are demanded : Let customer's tastes change so that consumers now demand 100 more units at each price. When the cost of the good is $50, elucidate how many units of the good are demanded?

Reviews

Write a Review

Finance Basics Questions & Answers

  Find weighted average cost of capital using retained earning

What is the weighted average cost of capital using retained earnings and what is the weighted average cost of capital using new common stock?

  Approach to measuring portfolio risk

Determine the Sharpe approach to measuring portfolio risk? If a portfolio has a higher Sharpe measure than the market in general under the Sharpe approach, determine the implication?

  Compute variance of the returns on common stock

The rate of return on the common stock of Flowers by Flo is expected to be 14 percent in a boom economy, 8 percent in a normal economy, and only 2 percent in a recessionary economy.

  Computing earnings per share

Rockwell paper company had earnings after taxes of $580,000 in the year 2003 with 400,000 shares of stock outstanding. On January 1, 2004, the firm issued 35,000 new shares. Calculate earnings per share for year 2004.

  Computation of earnings per share

Analysis was forecasting fiscal 2003 and 2004 earnings per share for Cisco systems of $.54 and $.61 respectively. Cisco's shares traded at $15 at the time. Suppose the long-term growth rate will be at 4%.

  Business finance-merger of world enterprises and wheelrim

The Muck and Slurry merger has fallen through but World Enterprises is determined to report earnings per share of $2.67. It therefore acquires the Wheelrim and Axle Company. You are given the following facts:

  Financial forces effecting balance of payments

Describe how financial forces such as tariffs, taxes, inflation, and currency exchanges effect balance of payments.

  Objectives and true false question based on finance

If a person is diabetic and is applying for a new health care insurance policy, they might not receive adequate coverage due to which of the following?

  Question based on taxation and stock

Sarah owns 45 percent of stock in a C company that had a profit of 260,000$ in 2011. Kevin owns a 45 percent interest in a partnership that had a benefit of 260,000$ during the year. Find the income for Kevin and Sarah report for 2011.

  Interest that should be capitalized

Nguyen Corp constructed assets costing $600 000. The Weighted average accumulated expenditures on these assets during the year was $400 000. Find out the amount of interest that must be capitalized by Nguyen Corp during the year of 2005?

  Calculation of net present value of a project with annuity

Calculation of net present value of a project with annuity and What is the project's NPV

  Markets a least semi strong

You do a study and find out that on average stock prices for firms decrease 3 percent evfor every 5 percent decrease in inside ownership.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd