A money manager is holding the following portfolio:
The risk-free rate is 6 percent and the portfolio's required rate of return is 12.5 percent. 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) 11.91%
B) 12.24%
C) 12.87%
D) 13.63%
E) 14.12%

Question

A money manager is holding the following portfolio:
 The risk-free rate is 6 percent and the portfolio's required rate of return is 12.5 percent. 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) 11.91% 
B) 12.24% 
C) 12.87% 
D) 13.63% 
E) 14.12%

Quizplus · Accepted Answer

The Answer of A money manager is holding the following portfolio:
 The risk-free rate is 6 percent and the portfolio's required rate of return is 12.5 percent. 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) 11.91% 
B) 12.24% 
C) 12.87% 
D) 13.63% 
E) 14.12%

A Money Manager Is Holding the Following Portfolio