A money manager is holding the following portfolio: Stock Amount Invested Beta 1
ID: 2705175 • Letter: A
Question
A money manager is holding the following portfolio: Stock Amount Invested Beta 1 $300,000 0.6 2 300,000 1.0 3 500,000 1.4 4 500,000 1.8The risk-free rate is 6% and the portfolio's required return is 12.5%. The manager would like to sell all of her holdings of Stock 1 and use the proceeds to purchase more shares of Stock 4. What would be the portfolio's required rate of return following this change? Answer
13.63%
10.29%
11.05%
12.52%
14.33% A money manager is holding the following portfolio: Stock Amount Invested Beta 1 $300,000 0.6 2 300,000 1.0 3 500,000 1.4 4 500,000 1.8
The risk-free rate is 6% and the portfolio's required return is 12.5%. The manager would like to sell all of her holdings of Stock 1 and use the proceeds to purchase more shares of Stock 4. What would be the portfolio's required rate of return following this change? A money manager is holding the following portfolio: Stock Amount Invested Beta 1 $300,000 0.6 2 300,000 1.0 3 500,000 1.4 4 500,000 1.8
The risk-free rate is 6% and the portfolio's required return is 12.5%. The manager would like to sell all of her holdings of Stock 1 and use the proceeds to purchase more shares of Stock 4. What would be the portfolio's required rate of return following this change? A money manager is holding the following portfolio: Stock Amount Invested Beta 1 $300,000 0.6 2 300,000 1.0 3 500,000 1.4 4 500,000 1.8
The risk-free rate is 6% and the portfolio's required return is 12.5%. The manager would like to sell all of her holdings of Stock 1 and use the proceeds to purchase more shares of Stock 4. What would be the portfolio's required rate of return following this change? Stock Amount Invested Beta 1 $300,000 0.6 2 300,000 1.0 3 500,000 1.4 4 500,000 1.8 13.63% 10.29% 11.05% 12.52% 14.33% Stock Amount Invested Beta 1 $300,000 0.6 2 300,000 1.0 3 500,000 1.4 4 500,000 1.8
Explanation / Answer
Thus, ks = 0.06 + (0.05)1.525 = 13.625%