Suppose you are the money manager of a $5.13 million investment fund. 0.75 If th

Question

Suppose you are the money manager of a $5.13 million investment fund.

0.75

If the market's required rate of return is 12% and the risk-free rate is 4%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.

A $   480,000                                 1.50 B 500,000                                 (0.50) C 1,500,000                                 1.25 D 2,650,000   

0.75

If the market's required rate of return is 12% and the risk-free rate is 4%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.

Explanation / Answer

Portfolio beta=Respective betas*Respective weights

=(480000/5,130,000*1.5)+(500,000/5,130,000*-0.5)+(1,500,000/5,130,000*1.25)+(2,650,000/5,130,000*0.75)

=0.84454191

required return= risk-free rate +Beta*(MArket rate- risk-free rate )

=4+0.84454191*(12-4)

which is equal to

=10.76%(Approx).

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