Question

If the risk-free rate is 6 percent and the market risk premium is 9.5% and below are the details of your portfolio: Security Amount Invested Beta A $50,000,000 0.1 B $60,000,000 0.3 C $40,000,000 0.7 What is the required rate of return of your portfolio? A- 0.34% D-7% C-6% B-9.23%

Answer 1

	a	b	c	d= a+b*c	e	d*e
Stock	Risk free	Beta	Market premium	Expected return	Investment	Portfolio return
A	6%	0.1	9.50%	6.95%	$         50,000,000	$         3,475,000
B	6%	0.3	9.50%	8.85%	$         60,000,000	$         5,310,000
C	6%	0.7	9.50%	12.65%	$         40,000,000	$         5,060,000
					$       150,000,000	$       13,845,000
Portfolio expected return=	13845000/150000000	9.230%

Answer is 9.23%

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