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Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of
Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 10.00% and the risk-free rate is 5.00%. What rate of return should investors expect (and require) on this fund?
| Stock | Amount | Beta |
| A | $1,075,000 | 1.20 |
| B | 675,000 | 0.50 |
| C | 750,000 | 1.40 |
| D | 500,000 | 0.75 |
| $3,000,000 | ||
| 1. | 10.56% | |
| 2. | 10.08% | |
| 3. | 10.83% | |
| 4. | 11.67% | |
| 5. | 11.38% |
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