Suppose you are the money manager of a $4.82 millioninvestment fund. The fund consists of four stocks with the following investments and betas:Stock          Investment               BetaA               $ 460,000                 1.50B               500,000                    (0.50)C               1,260,000                1.25D                 2,600,000              0.75If the market’s required rate of return is 8% and the risk-free rate is 4%, what is the fund’s required rate of return?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 10P
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Suppose you are the money manager of a $4.82 million
investment fund. The fund consists of four stocks with the following investments and betas:
Stock          Investment               Beta
A               $ 460,000                 1.50
B               500,000                    (0.50)
C               1,260,000                1.25
D                 2,600,000              0.75
If the market’s required rate of return is 8% and the risk-free rate is 4%, what is the fund’s required rate of return?

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