Question

Portfolio required return

Suppose you are the money manager of a $4.18 million investment fund. The fund consists of four stocks with the following investments and betas:

Stock	Investment	Beta
A	$   340,000	1.50
B	740,000	- 0.50
C	1,300,000	1.25
D	1,800,000	0.75

If the market's required rate of return is 12% and the risk-free rate is 3%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

=3%+(340000*1.50+740000*(-0.50)+1300000*1.25+1800000*0.75)/(4.18*10^6)*(12%-3%)
=9.707%