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Economics, Public Finance
Year 4
Calculating the required rate of return.
The assets of a particular investment fund are:
Stock A with an Investment of $200,000 and a beta of 1.50. Stock B with an Investment of $300,000 and a beta of -0.50. Stock C with an Investment of $500,000 and a beta of 1.25. Stock D with an Investment of $1,000,000 and a beta of 0.75.
The required market rate of return is 15% and the risk-free rate is 7%. What is the required rate of return on the investment fund?
a) 14.3%
b) 15.0%
c) 13.1%
d) 12.7%
e) 10.3%
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