Ch $08-$ End$-$of$-$Chapter Problems $-$ Risk and Rates of Return

Back to Assignment

Attempts $[$

Keep the Highest $/1$

Problem $8\mathrm{.}16($CAPM and Portfolio Return$)$

You have been managing a $$5$ million portfolio that has a beta of $1\mathrm{.}15$ and a required rate of return of $13\mathrm{.}625\%.$ The current risk$-$free rate is $5\%.$ Assume that

you receive another $$500,000.$ If you invest the money in a stock with a beta of $0\mathrm{.}85,$ what will be the required return on your $$5\mathrm{.}5$ million portfolio? Do not

round intermediate calculations. Round your answer to two decimal places.

$\%$