Question

In: Finance

Suppose you are the money manager of a $4.38 million investment fund. The fund consists of...

Suppose you are the money manager of a $4.38 million investment fund. The fund consists of four stocks with the following investments and betas:

Stock Investment Beta
A $   440,000 1.50
B 400,000 (0.50 )
C 1,440,000 1.25
D 2,100,000 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.

  %

Solutions

Expert Solution

Ans 11.25%

Stock INVESTMENT (i) Beta (ii) Investment* Beta (i)* (ii)
A                       4,40,000                      1.50                                      6,60,000.00
B                       4,00,000                   (0.50)                                   (2,00,000.00)
C                    14,40,000                      1.25                                   18,00,000.00
D                    21,00,000                      0.75                                   15,75,000.00
Total                    43,80,000                                         38,35,000
AVERAGE BETA = (INVESTMENT * BETA) / TOTAL INVESMENT
3835000 / 4380000
0.875570776256
Required Return = Risk free Return + (Market Return - Risk free return)* Beta
Required Return = 6% + (12% - 6%)*0.875570776256
Required Return = 11.25%

Related Solutions

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.
Suppose you are the money manager of a $4.18 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.18 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $   420,000                                 1.50 B 400,000                                 (0.50) C 1,460,000                                 1.25 D 1,900,000                                 0.75 If the market's required rate of return is 9% and the risk-free rate is 7%, 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 $4.66 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.66 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $ 240,000 1.50 B 520,000 (0.50) C 900,000 1.25 D 3,000,000 0.75 If the market's required rate of return is 12% 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 $4.62 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.62 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $   360,000 1.50 B 600,000 (0.50 ) C 960,000 1.25 D 2,700,000 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.
Suppose you are the money manager of a $4.48 million investment fund. The fund consists of...
Suppose you are the money manager of a $4.48 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $   340,000 1.50 B 800,000 (0.50 ) C 1,140,000 1.25 D 2,200,000 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. 2. An individual has $20,000...
Suppose you are the money manager of a $3.92 million investment fund. The fund consists of...
Suppose you are the money manager of a $3.92 million investment fund. The fund consists of four stocks with the following investments and betas: Stock Investment Beta A $   200,000                                 1.50 B 620,000                                 (0.50) C 900,000                                 1.25 D 2,200,000                                 0.75 If the market's required rate of return is 9% 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.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT