Question: Suppose k rf = 5%, k m = 10%, and A =1.3, k A =? Suppose k rf = 5%, k m = 10%, and

  1. Suppose krf = 5%, km = 10%, and A =1.3, kA=?
  2. Suppose krf = 5%, km = 10%, and kB =15%, B =?
  3. Suppose market risk premium (MRP) = 6%, kC = 15%, and Stock C is an average stock (C = 1.0), km = ?
  4. Suppose you are the money manager of a $20 million investment fund. The fund invests in 3 stocks with the following investments and betas:

Stock Investment Beta

A $8 million 1.50

B $7 million (0.5)

C $5 million 1.25

If the markets required rate of return is 14% and the risk-free rate is 6%, what is the funds required rate of return?

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