Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. suppose you manage a $3.87 million fund that consi

Suppose you manage a $3.87 million fund that consists of four stocks wuth the following investments: Stock/Investment/Beta A...

Free

70.2K

Verified Solution

Question

Finance

Suppose you manage a $3.87 million fund that consists of fourstocks wuth the following investments:
Stock/Investment/Beta
A $300000 1.50
B 300000 -0.50
C 1020000 1.25
D 2250000 0.75
If market's required rate if return is 12% and the risk freerate is 4%, What is the fund's required rate of return?

Answer & Explanation Solved by verified expert
4.2 Ratings (745 Votes)

Ans 10.74%

Stock INVESTMENT (i) Beta (ii) Investment* Beta (i)* (ii)
A              3,00,000                    1.50                         4,50,000.00
B              3,00,000                   (0.50)                       (1,50,000.00)
C            10,20,000                    1.25                      12,75,000.00
D            22,50,000                    0.75                      16,87,500.00
Total            38,70,000                      32,62,500.00
AVERAGE BETA = (INVESTMENT * BETA) / TOTAL INVESTMENT
3262500 / 3870000
0.843023256
Required Return = Risk free Return + (Market Return - Risk free return)* Beta
Required Return = 4% + (12% - 4%)*0.843023256
Required Return = 10.74%

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Suppose you manage a $3.87 million fund that consists of fourstocks wuth the following investments:Stock/Investment/BetaA $300000 1.50B 300000 -0.50C 1020000 1.25D 2250000 0.75If market's required rate if return is 12% and the risk freerate is 4%, What is the fund's required rate of return?

Other questions asked by students

Finance
1.2K views

Zayas, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 ?$ 53,000 ?$ 53,000 1 29,000 16,700 2 23,000 20,700 3 17,500 25,000 4 12,600 25,700 What is the...

Basic Math
1.2K views

Multivariable calculus Evaluate: ? 3? 2 ?? + 2???? using two different methods. C is the boundary...

Chemistry
1.2K views

A 20.00 mL solution of 0.200M diprotic acid (H2A, pKa1=3.500, pKa2=8.500) is titrated with 0.250M KOH. Sketch...

General Management
1.2K views

Define perception and describe its elements Understand how marketers use perception to create favourable brand images Understand the...

Physics
1.2K views

Aakash Institute 40 In figure there are two concentric coils in perpendicular planes carrying equal...

Physics
1.2K views

Max Mark s 01 Multiple Choice Select 1 out of 4 options for the question...

Accounting
1.2K views

prepare a cash budget for terranova for the quarter ending in December 31, 2020...

Accounting
1.2K views

Pondview Apartments is a 600-unit apartment complex. When the apartments are 90% occupied, monthly operating...

Accounting
1.2K views

You deposit $1.50 in the bank, the year is 2017. Assuming you were able to...

Accounting
1.2K views

Q.2 Wadeod Manufacturing Co. uses perpetual inventory system while recording their inventory. They incurred the...

Accounting
1.2K views

BREAKEVEN ANALYSIS 2. Nature's Spring Water Resources Corporation dispenses its product Nature's Spring Water via...

Finance
1.2K views

Fly-By-Night Couriers is analyzing the possible acquisition of Flash-in-the-Pan Restaurants. Neither firm has debt. The...