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Joel Foster is the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return

Joel Foster is 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 11.00% 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

1.50

B

675,000

0.30

C

750,000

0.80

D

1,500,000

1.40

$4,000,000

10.56%

10.83%

11.11%

11.48%

11.77%

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