Problem 6-10
Portfolio Required Return
Suppose you manage a $5.255 million fund that consists of four stocks with the following investments: Stock Investment Beta A $480,000 1.50 B 475,000 -0.50 C 1,500,000 1.25 D 2,800,000 0.75 If the market's required rate of return is 11% and the risk-free rate is 7%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
Answer | ||||
Weight | Beta | Weigh*Beta | ||
A | $ 4,80,000 | 9.13% | 1.5 | 0.14 |
B | $ 4,75,000 | 9.04% | -0.5 | -0.05 |
C | $15,00,000 | 28.54% | 1.25 | 0.36 |
D | $28,00,000 | 53.28% | 0.75 | 0.40 |
$52,55,000 | BETA of Portfolio | 0.843 | ||
Fund's required rate of return =rf+beta*( market's required rate - rf) | ||||
7%+0.843*(11%-7%) | ||||
10.37% | ||||
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Problem 6-10 Portfolio Required Return Suppose you manage a $5.255 million fund that consists of four...
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