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2. Suppose you are a money manager of a $5 million investment fund. The fund is invested in four funds with the following investments and
2. Suppose you are a money manager of a $5 million investment fund. The fund is invested in four funds with the following investments and betas: Stock Shares Price Per Share Beta A 100,000 $10 1.50 B 100,000 $20 0.85 75,000 $20 1.00 D 20,000 $25 1.60 a. If the market expected rate of return is 9.0% and the risk free rate (T-bill return) is 4%, what is the fund's beta and expected rate of return? (hint! Calculate the weights first) b. Stock D is considered too risky. You decide to sell it at its posted value and invest the proceeds T-bills (what is the T-bill beta?). Find the new fund's beta and expected rate of return
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