Assume that you are the portfolio manager of the SF Fund, a $400,000 hedge fund that contains the following stocks. The required rate of return on the market is 13.0%, the real risk-free rate is 2.0%, and investors expect a 4.0% future inflation rate. What rate of return should investors expect (and require) on this fund?

Stock Amount Beta A $160,000 2.20 B $100,000 0.76 C $ 80,000 1.10 D $ 60,000 1.40

Total Portfolio $400,000 A. 10.5% B. 12.5% C. 14.5% D. 16.5% E. 18.5%