Suppose you manage a $4 million fund that consists of four stocks with the following investments: Stock Investment Beta A $ 400,000 1.50 B 600,000 -0.50 1,000,000 1.25 D 2,000,000 0.75 If the market's required rate of return is 14% and the risk-free rate is 6%, what is the fund's required rate of return? 2-13 Historical Realized Rates of Return You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: Year F F 2014 -20.00% -5.00% 2015 42.00 15.00 2016 20.00 -13.00 2017 -8.00 50.00 2018 25.00 12.00 a. Calculate the average rate of return for each stock during the 5-year period. b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? c. Calculate the standard deviation of returns for each stock and for the portfolio. d. Suppose you are a risk-averse investor. Assuming Stocks A and B are your only choices, would you prefer to hold Stock A, Stock B, or the portfolio? Why