Problem:
Hazel Morrison, a mutual fund manager, has a $60 million portfolio with a beta of 1.00. The risk free rate is 3.25%, and the market risk premium is 6.00%. Hazel expects to receive an additional $40 million, which she plans to invest in additional stocks. After investing the additional funds, she wants the fund's required and expected return to be 13.00%.
Required:
Question: What must the average beta of the new stocks be to achieve the target required rate of return? Please provide all calculation and formulas.