Suppose you are the money manager of a $4.58 million investment fund. The fund consists of four stocks with the following investments and betas:
Stock Investment Beta
A $ 240,000 1.50
B 600,000 (0.50 )
C 1,240,000 1.25
D 2,500,000 0.75
If the market's required rate of return is 10% and the risk-free rate is 4%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. ______%
PLEASE SHOW WORK PLEASE. SHOW HOW IN CALCULATOR OR BASIC MATH STRUCTURE IF POSSIBLE. THANK YOU
Portfolio beta=Respective beta*Respective investment weight
=(240,000/4,580,000*1.5)+(600,000/4,580,000*-0.5)+(1,240,000/4,580,000*1.25)+(2,500,000/4,580,000*0.75)
=0.76091703
Required return=risk free rate+beta*(market rate-risk free rate)
=4+(10-4)*0.76091703
=8.57%(Approx).
Suppose you are the money manager of a $4.58 million investment fund. The fund consists of...
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