Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fun that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 2.00%. What rate of return should investors expect (and require) on this fund?

Stock A (Amount $925,000; Beta 1.20)

Stock B (Amount $675,000; Beta 0.50)

Stock C (Amount $900,000; Beta 1.40)

Stock D (Amount $500,000; Beta 0.75)

Total Amount= $3,000,000

Answers:

11.25%

10.57%

10.80%

10.69%

10.35%