The money manager is holding the following portfolio Stock Amont Invested Beta 1

Question

The money manager is holding the following portfolio

Stock              Amont Invested              Beta

1                      300,000                        0.6

2                      300,000    1.0

3                      500,000                         1.4

4                      500,000                        1.8

The risk free rate is 6% and the portfolio's required return is 12.5%. The manager would like to sell all of her holdings of Stock 1 and use the preceeds to purchase more shares of Stock 4. What would be the portfolio's required rate of return following this change?

A.13.63

B.10.29

C.11.05

D.12.52

E.14.33

Explanation / Answer

D.12.52

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