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QUESTION
You are a manager of the Lowell Fund and manage a portfolio of $21 million. Your portfolio has a beta of 1.2 and required return of 12 percent.
You are a manager of the Lowell Fund and manage a portfolio of $21 million. Your portfolio has a beta of 1.2 and required return of 12 percent. You receive $4 million additional to invest in the portfolio, and you invest it in a stock with a beta of 1.6. The risk free rate is 5 percent. What is the required return on the new portfolio?
