Question
Suppose you are the money manager of a $4.07 million investment fund. The fund consists of four stocks with the following investments and betas: Stock
Suppose you are the money manager of a $4.07 million investment fund. The fund consists of four stocks with the following investments and betas:
| Stock | Investment | Beta |
| A | $ 240,000 | 1.50 |
| B | 560,000 | (0.50) |
| C | 1,420,000 | 1.25 |
| D | 1,850,000 | 0.75 |
If the market's required rate of return is 12% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To calculate the funds required rate of return we need to find the weighted average of the required ...
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Fundamentals of Financial Management
Authors: Eugene F. Brigham
Concise 9th Edition
1305635937, 1305635930, 978-1305635937
