Question: Problem 12-26 CAPM and Expected Return (LO2) A mutual fund manager expects her portfolio to earn a rate of return of 13% this year. The

Problem 12-26 CAPM and Expected Return (LO2) A mutual fund manager

Problem 12-26 CAPM and Expected Return (LO2) A mutual fund manager expects her portfolio to earn a rate of return of 13% this year. The beta of her portfolio is .5. Assume rate of return available on risk-free assets is 7% and you expect the rate of return on the market portfolio to be 17%. a. Calculate the expected rate of return that investors will demand of the portfolio. Expected rate of return b. Should you invest in this mutual fund? O Yes O No

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