2. Suppose you are the money manager of a $4 million investment fund. The fund consists...

  

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2. Suppose you are the money manager of a $4 million investment fund. The fund consists of 4 stocks with the following investments and betas: Stock A B C D Investment Beta 400,000 1.50 600,000 -0.50 1,000,000 1.25 2,000,000 0.75 If the market required rate of return is 14% and the risk-free rate is 6%, what is the fund's required rate of return? 3. Suppose the risk-free rate is 5%, the market rate of return is 12% and the rate of return on the stock of company A is 12%. (a) Calculate the beta for Company A's stock. (b) If the stock of Company A has a beta of 2.0, what would be the new required rate of return for Company A's stock? 2. Suppose you are the money manager of a $4 million investment fund. The fund consists of 4 stocks with the following investments and betas: Stock A B C D Investment Beta 400,000 1.50 600,000 -0.50 1,000,000 1.25 2,000,000 0.75 If the market required rate of return is 14% and the risk-free rate is 6%, what is the fund's required rate of return? 3. Suppose the risk-free rate is 5%, the market rate of return is 12% and the rate of return on the stock of company A is 12%. (a) Calculate the beta for Company A's stock. (b) If the stock of Company A has a beta of 2.0, what would be the new required rate of return for Company A's stock?