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Stock Investment Beta $ 460,0000 1.50 A в 500,000 (0.50) C 1,260,000 125 D 2,600,000 0.75

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter2: Financial Statements, Cash Flow,and Taxes

Section: Chapter Questions

Problem 21SP: Begin with the partial model in the file Ch02 P21 Build a Model.xlsx on the textbooks Web site. a....

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Question

PORTFOLIO REQUIRED RETURN 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: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?

Stock Investment Beta
$ 460,0000 1.50
A
в
500,000
(0.50)
C
1,260,000
125
D
2,600,000
0.75

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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