Consider the following information and then calculate the required rate of return for the Global Equity Fund, which includes 4 stocks in the portfolio. The market's required rate of return is 16.75%, the risk-free rate is 4.25%, and the Fund's assets are as follows: Round your answer to two decimal places.
|
Stock |
Investment |
Beta |
|
A |
$205,000 |
1.55 |
|
B |
$345,000 |
0.85 |
|
C |
$565,000 |
–0.45 |
|
D |
$1,115,000 |
1.98 |
|
Stock |
Investment |
Weight of each investment = W |
Beta = B |
Risk free rate = Rf |
Market rate = Rm |
Return = Ri = Rf + B x (Rm-Rf) |
Weighted Return = Ri x W |
|
A |
$205,000 |
9.19283% |
1.55 |
4.25% |
16.75% |
23.62500% |
2.1718% |
|
B |
$345,000 |
15.47085% |
0.85 |
4.25% |
16.75% |
14.87500% |
2.3013% |
|
C |
$565,000 |
25.33632% |
-0.45 |
4.25% |
16.75% |
-1.37500% |
-0.3484% |
|
D |
$1,115,000 |
50.00000% |
1.98 |
4.25% |
16.75% |
29.00000% |
14.5000% |
|
$2,230,000 |
100.00% |
Total = Return on Portfolio = |
18.62% |
Return on Portfolio = Required rate of return for the Global Equity Fund = 18.62%
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