. Problem 8.07 Click here to read the eBook: Risk in a Portfolio Context: The CAPM Problem Walk-Through PORTFOLIO REQUIRED...

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Finance

.  Problem 8.07
Click here to read the eBook: Risk in a Portfolio Context: TheCAPM
Problem Walk-Through
PORTFOLIO REQUIRED RETURN
Suppose you are the money manager of a $3.79 million investmentfund. The fund consists of four stocks with the followinginvestments and betas:
Stock Investment Beta
A $   200,000                                 1.50
B 560,000                                 (0.50)
C 1,180,000                                 1.25
D 1,850,000                                 0.75
If the market's required rate of return is 9% and the risk-freerate is 5%, what is the fund's required rate of return? Do notround intermediate calculations. Round your answer to two decimalplaces.

%

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4.3 Ratings (671 Votes)

First we will calculate the weights of each stock in the portfolio This is done to calculate the weighted average beta of the portfolio Weight of each stock Stocks value Total portfolio value Total portfolio value 379 million or 3790000 Stock See Answer

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