Portfolio beta
Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 0.69. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and to use these proceeds to buy another stock with a beta of 2.05. What would your portfolio's new beta be? Round your answer to two decimal places.
CAPM and portfolio return
You have been managing a $5 million portfolio that has a beta of 1.05 and a required rate of return of 16%. The current risk-free rate is 4.75%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 1.75, what will be the required return on your $5.5 million portfolio? Round your answer to two decimal places.
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