Question
Suppose you are the money manager of a $5.26 million investment fund. The fund consists of four stocks with the following investments and betas: Stock
Suppose you are the money manager of a $5.26 million investment fund. The fund consists of four stocks with the following investments and betas:
| Stock | Investment | Beta | ||
| A | $ 580,000 | 1.60 | ||
| B | 600,000 | (0.60 | ) | |
| C | 1,080,000 | 1.45 | ||
| D | 2,000,000 | 0.75 | ||
If the market's required rate of return is 11% and the risk-free rate is 3%, 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
There are 3 Steps involved in it
Step: 1
To calculate the funds required rate of return we can use the formula for the weighted average cost ...
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Fundamentals of Financial Management
Authors: Eugene F. Brigham
Concise 9th Edition
1305635937, 1305635930, 978-1305635937
