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.  Problem 8.07 Click here to read the eBook: Risk in a Portfolio Context: The CAPM Problem Walk-Through PORTFOLIO REQUIRED...

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Finance

.  Problem 8.07

Click here to read the eBook: Risk in a Portfolio Context: TheCAPM
Problem Walk-Through

PORTFOLIO REQUIRED RETURN

Suppose you are the money manager of a $3.79 million investmentfund. The fund consists of four stocks with the followinginvestments and betas:

StockInvestmentBeta
A$   200,000                                1.50
B560,000                                (0.50)
C1,180,000                                1.25
D1,850,000                                0.75

If the market's required rate of return is 9% and the risk-freerate is 5%, what is the fund's required rate of return? Do notround intermediate calculations. Round your answer to two decimalplaces.

%

Answer & Explanation Solved by verified expert
4.3 Ratings (671 Votes)
First we will calculate the weights of each stock in the portfolio This is done to calculate the weighted average beta of the portfolio Weight of each stock Stocks value Total portfolio value Total portfolio value 379 million or 3790000 Stock    See Answer
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