A mutual fund manager has a $20 million portfolio with a beta of 1.7.The risk-free rate is 4.5%, and the market risk premium is 7%. The manager expects toreceive an additional $5 million, which she plans to invest in a number of stocks. Afterinvesting the additional funds, she wants the fund’s required return to be 15%. Whatshould be the average beta of the new stocks added to the portfolio?

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Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.