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Portfolio Required Return Suppose you manage a $5.48 million fund that consists of four stocks with...

Portfolio Required Return Suppose you manage a $5.48 million fund that consists of four stocks with the following investments: Stock Investment Beta A $360,000 1.50 B 700,000 -0.50 C 1,420,000 1.25 D 3,000,000 0.75 If the market's required rate of return is 11% 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.

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Answer #1

Portfolio beta=Respective beta*Respective weight

=(360,000/5,480,000*1.5)+(700,000/5,480,000*-0.5)+(1,420,000/5,480,000*1.25)+(3,000,000/5,480,000*0.75)

=0.769160584

Required return=risk free rate+beta*(market rate-risk free rate)

=4+0.769160584*(11-4)

=9.38%(Approx).

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