Consider the following information and then calculate the requiredrate

QUESTION

Consider the following information and then calculate the requiredrate of return for the SI Fund. The total investment in the fund is$2,000,000. The market rate of return is 15% and the risk free rateis 7%.StockInvestmentBetaA$200,0001.50B$300,000-0.50C$500,0001.25D$1,000,0000.75
Amount Invested Beta Percent Invested 200,000 1.50 10% 300,000 -0.50 15% 500,000 1.25 25% 1,000,000 0.75 50% p = 0.19 k j = ER f (ER m ER f ) ER f = 7.0% Risk-free rate ER m -ER f = 8.0% Market Rate Risk-free rate p = 0.19 Beta of portfolio k j = 8.5% Required rate of return Step 1: Determine the percentage of eachstock invested as a percentage of the total invested amount. Step 2: Determine the Beta value for the entire portfoliofund by calculating the following:(Beta A * Percent

ed A) (Beta B * PercentInvested B) (Beta C * Percent Invested C) (Beta D *Percent Invested D) divided by 4 (which is the totalnumber of investments) Step 3: Determine required rate of return by taking theformula above:Required rate of return = Risk-free rate Beta of Portfolio(Market rate Risk-free rate) =7 (0.19)(15-7) =7 1.5 =8.5

ANSWER:

CLICK REQUEST FOR  AN EXPERT SOLUTION