Assume that the risk-free rate and market risk premium

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Suppose that the risk-free rate is 5% and that the market risk premium is 7%. What is the required return on (1) the market, (2) a stock with a beta of 1.0, and (3) a stock with a beta of 1.7? Assume that the risk-free rate is 5% and that the market risk premium is 7%.

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Suppose you manage a $4 million fund that consists of four stocks with the following investments:

Stock Investment Beta

A $ 400,000 1.50

B 600,000 − 0.50

C 1,000,000 1.25

D 2,000,000 0.75

If the market ’ s required rate of return is 14% and the risk-free rate is 6%, what is the fund ’ s required rate of return?

Reference no: EM13975191

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