Required rate of return on the new portfolio, Finance Basics

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Required rate of return on the new portfolio

Problem:

Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required return. The risk-free rate is 2.20%. You now receive another $4.50 million, which you invest in stocks with an average beta of 0.65.

Required:

Question: What is the required rate of return on the new portfolio? (Hint: You must first find the market risk premium, and then find the new portfolio beta.)

8.45%
6.94%
6.39%
6.32%
6.87%

Note: Solve the problem and show all work.

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