Correct Answer:

Portfolio Required Return Suppose you manage a $2 million fund that consists of four stocks with the following investments: Stock Investment Beta A $300,000 1.50 B 500,000 -0.50 600,000 1.25 D 600,000 0.75 If the market's required rate of return is 8% 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. A 1.5 B $300,000 500,000 600,000 600,000.00 2000000 -0.5 1.25 0.75 Market's required rate of return is Risk-free rate $2 million fund that consists of four stocks 8% 4% (260,000 / 4,590,000)*1.5+ (360,000 / 4,590,000) *(-0.5) + (1,220,000 / 4,590,000)*1.25+ (2,750,000 / 4,590,000)*0.75 0.225 -0.125 (300,000/2000000)*1.5 (500,000/2000000)*-0.5 (600,000/2000000)* 1.25 (600,000/2000000)*.75 0.375 0.225 0.7 6.8 4%+.7(8%-4%) Beta Required Return on Portfolio