STOCK Investment Beta

QUESTION 8-4 Is it possible to construct a portfolio of real-world stocks that has a required return equal to the risk-free rate? Explain. PROBLEMS 8-2 PORTFOLIO BETA An individual has $20,000 invested in a stock with a beta of 0.6 and another $75,000 invested in a stock with a beta of 2.5. If these are the only two investments in her portfolio, what is her portfolio’s beta? 8-7 PORTFOLIO REQUIRED RETURNSuppose you are the money manager of a $4.82 million investment fund. The fund consists of four stocks with the following investments and betas: STOCK Investment Beta A $ 460,000 1.50 B 500,000 (0.50) C 1,260,000 1.25 B 2,600,000 0.75 If the market’s required rate of return is 8% and the risk-free rate is 4%, what is the fund’s required rate of return. 8-17 PORTFOLIO BETA A mutual fund manager has a $20 million portfolio with a beta of 1.7. The risk-free rate is 4.5%, and the market risk premium is 7%. 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 15%. What should be the average beta of the new stocks added to the portfolio?