Consider 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: $\begin{array}{lrr}
\text { Stock }&\text { Investment }&\text { Beta}\
\mathrm{A} & \$ 200,000 & 1.50 \
\mathrm{~B} & \$ 300,000 & -0.50 \
\mathrm{C} & \$ 500,000 & 1.25 \
\mathrm{D} & \$ 1,000,000 & 0.75
\end{array}$
A) 9.58%
B) 10.09%
C) 10.62%
D) 11.18%
E) 11.77%

Question

Quizplus · Accepted Answer

IM $13.251 /$
IpF $7.00 \%$ 
Find portfolio beta:
 $$\begin{array} { l c c c c } 
&\text { Weight } &\text { Beta }&\text { Product } \
\$ 200,000 &0.100  & 1.50 & 0.1500  & \
\$ 300,000 & 0.150 & - 0.50 & - 0.0750 & \
\$ 500,000 & 0.250 & 1.25 & 0.3125 & \
\$ 1,000,000 & \underline { 0.500 } & 0.75 & \underline { 0.3750 } & \
\$ 2,000,000 & 1.000 & & \underline { 0.7625 } & = \text { portfolio beta }
\end{array}$$ 
Find RPM = rM - rRF = 6.25% rs = rRF + b(RPM) = 11.77%

Consider the Following Information and Then Calculate the Required Rate