Problem:
You have been managing a $5 million portfolio that has a beta of 1.60 and a required rate of return of 10%. The current risk-free rate is 3.00%. Assume that you receive another $500,000.
Requirement:
Question: If you invest the money in a stock with a beta of 1.90, what will be the required return on your $5.5 million portfolio?
Note: Show all workings.