Suppose you are the manager of an investment fund. The fund is invested in following three...

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Suppose you are the manager of an investment fund. The fund is invested in following three assets with the following investments and betas: Stock Shares C Price per share 50,000 $50 MCD 10,000 $200 Beta 1.60 0.40 Plus $0.5 million in T-bills, assumed as risk-free. a. If the market expected rate of return is 9% and the risk-free rate (T-bill return) is 4%, what is the fund's beta and expected rate of return? b. If you invest in C and T-Bills only, can you create a portfolio that will have a beta of 0.92? If so, report the weights, dollar investments, the number of shares in C and dollar amount in T- Bills (use the same total portfolio value). Suppose you are the manager of an investment fund. The fund is invested in following three assets with the following investments and betas: Stock Shares C Price per share 50,000 $50 MCD 10,000 $200 Beta 1.60 0.40 Plus $0.5 million in T-bills, assumed as risk-free. a. If the market expected rate of return is 9% and the risk-free rate (T-bill return) is 4%, what is the fund's beta and expected rate of return? b. If you invest in C and T-Bills only, can you create a portfolio that will have a beta of 0.92? If so, report the weights, dollar investments, the number of shares in C and dollar amount in T- Bills (use the same total portfolio value).

Answer rating: 100% (QA)

a To calculate the funds beta and expected rate of return we need to use the formula for the expected return of a portfolio Expected Return RiskFree R... View the full answer