Question
In: Finance
6. PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $4.9 million investment fund....
6. PORTFOLIO REQUIRED RETURN
Suppose you are the money manager of a $4.9 million investment fund. The fund consists of four stocks with the following investments and betas:
| Stock | Investment | Beta |
| A | $ 240,000 | 1.50 |
| B | 400,000 | (0.50) |
| C | 1,260,000 | 1.25 |
| D | 3,000,000 | 0.75 |
If the market's required rate of return is 9% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.
Solutions
Expert Solution
Beta of the portfolio = Weight of respective stocks * respective beta of the stocks
| Stock | Investment | Beta | Investment Weight (Respective Investment / Total Value) | Beta * Investment Weight |
| A | 2,40,000 | 1.5 | 0.0489795918367347 | 0.0734693877551020 |
| B | 4,00,000 | -0.5 | 0.0816326530612245 | -0.0408163265306122 |
| C | 12,60,000 | 1.25 | 0.2571428571428570 | 0.3214285714285710 |
| D | 30,00,000 | 0.75 | 0.6122448979591840 | 0.4591836734693880 |
| Total Value | 49,00,000 | 0.8132653061224490 |
As per CAPM,
Required Return =Risk Free rate + (Market Return - Risk Free Rate ) * Beta
= 6%+(9%-6%)*0.8132653061224490
= 8.44%
Answer = 8.44%
jeff jeffy answered 2 years agoRelated Solutions
PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $5.15 million investment fund. The...
PORTFOLIO REQUIRED RETURN
Suppose you are the money manager of a $5.15 million
investment fund. The fund consists of four stocks with the
following investments and betas:
Stock Investment Beta
A $ 500,000 1.50
B 400,000 (0.50)
C 1,500,000 1.25
D 2,750,000 0.75
If the market's required rate of return is 11% and the
risk-free rate is 6%, what is the fund's required rate of return?
Do not round intermediate calculations. Round your answer to two
decimal places.
%
PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $4.78 million investment fund. The...
PORTFOLIO REQUIRED RETURN
Suppose you are the money manager of a $4.78 million investment
fund. The fund consists of four stocks with the following
investments and betas:
Stock
Investment
Beta
A
$ 500,000
1.50
B
420,000
(0.50)
C
1,460,000
1.25
D
2,400,000
0.75
If the market's required rate of return is 10% and the risk-free
rate is 6%, what is the fund's required rate of return? Do not
round intermediate calculations. Round your answer to two decimal
places.
PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $4.72 million investment fund. The...
PORTFOLIO REQUIRED RETURN
Suppose you are the money manager of a $4.72 million investment
fund. The fund consists of four stocks with the following
investments and betas:
Stock
Investment
Beta
A
$ 460,000
1.50
B
440,000
(0.50)
C
1,220,000
1.25
D
2,600,000
0.75
If the market's required rate of return is 13% 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.
PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $4.95 million investment fund. The...
PORTFOLIO REQUIRED RETURN
Suppose you are the money manager of a $4.95 million investment
fund. The fund consists of four stocks with the following
investments and betas:
Stock
Investment
Beta
A
$ 480,000
1.50
B
660,000
(0.50)
C
1,060,000
1.25
D
2,750,000
0.75
If the market's required rate of return is 12% and the risk-free
rate is 6%, what is the fund's required rate of return? Do not
round intermediate calculations. Round your answer to two decimal
places.
%
Problem 8-7 Portfolio required return Suppose you are the money manager of a $4.09 million investment...
Problem 8-7 Portfolio required
return
Suppose you are the money manager of a $4.09 million investment
fund. The fund consists of 4 stocks with the following investments
and betas: Stock Investment Beta A $ 380,000 1.50 B 500,000 - 0.50
C 1,060,000 1.25 D 2,150,000 0.75 If the market's required rate of
return is 10% and the risk-free rate is 7%, what is the fund's
required rate of return? Round your answer to two decimal
places.
Suppose you are the money manager of a $4.57 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.57 million investment
fund. The fund consists of four stocks with the following
investments and betas:
Stock
Investment
Beta
A
$ 240,000
1.50
B
400,000
(0.50)
C
980,000
1.25
D
2,950,000
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.
Suppose you are the money manager of a $4.37 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.37 million investment
fund. The fund consists of four stocks with the following
investments and betas:
Stock
Investment
Beta
A
$ 200,000
1.50
B
320,000
(0.50)
C
1,300,000
1.25
D
2,550,000
0.75
If the market's required rate of return is 10% and the risk-free
rate is 3%, what is the fund's required rate of return? Do not
round intermediate calculations. Round your answer to two decimal
places.
Suppose you are the money manager of a $4.22 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.22 million investment
fund. The fund consists of four stocks with the following
investments and betas:
Stock
Investment
Beta
A
$ 260,000
1.50
B
300,000
(0.50
)
C
1,260,000
1.25
D
2,400,000
0.75
If the market's required rate of return is 8% and the risk-free
rate is 5%, what is the fund's required rate of return? Do not
round intermediate calculations. Round your answer to two decimal
places.
%
Suppose you are the money manager of a $4.86 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.86 million investment
fund. The fund consists of four stocks with the following
investments and betas:
Stock
Investment
Beta
A
$ 480,000
1.50
B
800,000
(0.50
)
C
980,000
1.25
D
2,600,000
0.75
If the market's required rate of return is 13% and the risk-free
rate is 5%, what is the fund's required rate of return? Do not
round intermediate calculations. Round your answer to two decimal
places.
Suppose you are the money manager of a $4.37 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.37 million investment
fund. The fund consists of four stocks with the following
investments and betas:
Stock
Investment
Beta
A
$ 460,000
1.50
B
680,000
(0.50)
C
1,380,000
1.25
D
1,850,000
0.75
If the market's required rate of return is 11% and the risk-free
rate is 6%, what is the fund's required rate of return? Do not
round intermediate calculations. Round your answer to two decimal
places.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- A sample human input file that contains test values that a human would enter on the...
- A solution is prepared by dissolving 15 ml of methanol in 150.0 ml water at 25...
- Consider a newlywed who is planning a wedding anniversary gift of a trip to Canada for...
- We are evaluating a project that costs $868,000, has a life of eight years, and has...
- a.) Given sample data: 61.2, 61.9, 62.8, 63.1, 64.0, 64.3, 64.9, 65.5, 66.3 and 67.9, test...
- A research paper describes an experiment in which 74 men were assigned at random to one...
- 1. Which components would a retail organization consider while surveying/assessing the suitability of its products for...
ADVERTISEMENT