Bundle: Fundamentals Of Financial Management, 15th + Mindtap Finance, 2 Terms (12 Months) Printed Access Card
15th Edition
ISBN: 9781337609838
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 8, Problem 7P
Summary Introduction
To determine: The fund’s required
The Required Rate of Return:
The required rate of return is the rate which should be the minimum earned on an investment to keep that investment running in the market. When the required return is earned only then the users and the companies invest in that particular investment.
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PORTFOLIO REQUIRED RETURN Suppose you are the money manager of a $4.82 million investment fund. The fund consists of four stocks with the following investments and betas:If the market’s required rate of return is 8% and the risk-free rate is 4%, what is the fund’s required rate of return?
Suppose you manage a $5 million fund that consists of four stocks with the following investments:
Stock
Investment
Beta
A
$250,000
1.50
B
750,000
-0.50
C
1,250,000
1.25
D
2,750,000
0.75
If the market's required rate of return is 9% and the risk-free rate is 5%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.
%
Chapter 8 Solutions
Bundle: Fundamentals Of Financial Management, 15th + Mindtap Finance, 2 Terms (12 Months) Printed Access Card
Ch. 8 - Prob. 1QCh. 8 - Prob. 2QCh. 8 - Prob. 3QCh. 8 - Is it possible to construct a portfolio of...Ch. 8 - Stock A has an expected return of 7%, a standard...Ch. 8 - A stock had a 12% return last year, a year when...Ch. 8 - If investors aversion to risk increased, would the...Ch. 8 - Prob. 8QCh. 8 - In Chapter 7, we saw that if the market interest...Ch. 8 - Prob. 10Q
Ch. 8 - Prob. 11QCh. 8 - EXPECTED RETURN A stocks returns have the...Ch. 8 - PORTFOLIO BETA An individual has 20,000 invested...Ch. 8 - REQUIRED RATE OF RETURN Assume that the risk-free...Ch. 8 - Prob. 4PCh. 8 - BETA AND REQUIRED RATE OF RETURN A stock has a...Ch. 8 - EXPECTED RETURNS Stocks A and B have the following...Ch. 8 - Prob. 7PCh. 8 - BETA COEFFICIENT Given the following; information,...Ch. 8 - REQUIRED RATE OF RETURN Stock R has a beta of 2.0,...Ch. 8 - Prob. 10PCh. 8 - CAPM AND REQUIRED RETURN Calculate the required...Ch. 8 - REQUIRED RATE OF RETURN Suppose rRF = 4%, rM =...Ch. 8 - CAPM, PORTFOLIO RISK, AND RETURN Consider the...Ch. 8 - PORTFOLIO BETA Suppose you held a diversified...Ch. 8 - CAPM AND REQUIRED RETURN HR Industries (HRI) has a...Ch. 8 - Prob. 16PCh. 8 - Prob. 17PCh. 8 - EXPECTED RETURNS Suppose you won the lottery and...Ch. 8 - EVALUATING RISK AND RETURN Stock X has a 10%...Ch. 8 - REALIZED RATES OF RETURN Stocks A and B have the...Ch. 8 - SECURITY MARKET LINE You plan to invest in the...Ch. 8 - Prob. 22SPCh. 8 - Prob. 23ICCh. 8 - Prob. 1TCLCh. 8 - Prob. 2TCLCh. 8 - Prob. 3TCLCh. 8 - Using Past Information to Estimate Required...Ch. 8 - Prob. 5TCLCh. 8 - Prob. 6TCLCh. 8 - Prob. 7TCLCh. 8 - Prob. 8TCL
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- Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 2.00%. What rate of return should investors expect (and require) on this fund? A. 11.25% B. 10.57% C. 10.80% D. 10.69% E.10.35%arrow_forwardSuppose you form a portfolio consisting of $31,000 invested in a mutual fund with beta of 1.6, $18,000 invested in Treasury securities $19,000 invested in an index fund with the same beta as the entire market. Expected market risk premium is 6.3%. Risk-free rate is 0.8% What is the exped return of this portfolio according to the CAPM? O a. 6.9% Ob. 6.6% O c. 7.2% d. 9.1% e. 5.8%arrow_forwardConsider 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 11.25%, the risk-free rate is 4.65%, and the Fund's assets are as follows: Stock Investment Beta A $175,000 1.35 B $365,000 0.85 C $545,000 –0.45 D $1,145,000 2.08arrow_forward
- ANSWER EACH PART PLEASE!arrow_forwardConsider the following information and then calculate the required rate of return for the Universal Investment Fund, which holds 4 stocks. The market's required rate of return is 13.25%, the risk-free rate is 7.00%, and the Fund's assets are as follows: Stock Investment Beta A $200,000 1.5 B $300,000 -0.5 C $500,000 1.25 D $1,000,000 0.75arrow_forwardAssume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 2.00%. What rate of return should investors expect (and require) on this fund? Do not round your intermediate calculations. Stock A B C D 11.16% 10.82% 9.93% 9.37% 9.71% Amount $1,075,000 $675,000 $750,000 $500,000 $3,000,000 Beta 1.20 0.50 1.40 0.75arrow_forward
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