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Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 2.00%. What rate of return should investors expect (and require) on this fund?
Stock Amount Beta
A 1075000 1.2
B 675000 0.5
C 750000 1.4
D 500000 0.75

Respuesta :

mosescrawford2008

Answer:

a

Explanation:

AVERAGE BETA = (INVESTMENT * BETA) / TOTAL INVESMENT  

3052500 / 3000000  

1.0175    

Required Return = Risk free Return + (Market Return - Risk free return)* Beta

Required Return = 5% + (10% - 5%)*1.0175  

Required Return = 10.08%  

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