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Problem 6-10 Portfolio Required Return Suppose you manage a $5.255 million fund that consists of four...

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. %

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Answer #1
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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