Calculate the required rate of return for the Wagner Assets Management Group,which holds 4 stocks.The market's required rate of return is 15.0%,the risk-free rate is 7.0%,and the Fund's assets are as follows: $$\begin{array} { c c c }
\text { Stack } & \text { Investment } &\text { Beta } \
\text { A } & \$ & 1.50\
\text { } & 200,000 & \

\text { B } & & - 0.50 \
\text { } & 300,000 & \

\text { C } & &1.25 \
\text { } & 500,000 & \

\text { D } & 1,000,000 & 0.75& \

\end{array}$$
A) 10.67%
B) 11.23%
C) 11.82%
D) 12.45%
E) 13.10%

Question

Calculate the required rate of return for the Wagner Assets Management Group,which holds 4 stocks.The market's required rate of return is 15.0%,the risk-free rate is 7.0%,and the Fund's assets are as follows: $$\begin{array} { c c c } 
\text { Stack } &  \text { Investment } &\text { Beta }  \
\text { A } & \$ & 1.50\
\text {  } & 200,000 & \

\text { B } & & - 0.50 \
\text {  } & 300,000 & \

\text { C } & &1.25 \
\text {  } & 500,000 & \

\text { D } & 1,000,000 & 0.75& \

\end{array}$$
A) 10.67%
B) 11.23%
C) 11.82%
D) 12.45%
E) 13.10%

Quizplus · Accepted Answer

$$\begin{array} { l l } \mathrm { r } _ { \mathrm { M } } : & 15.0 \% \ \mathrm { r} _ { \mathrm { RF } } & 7.0 \% \end{array}$$ $\begin{array}{lccc} \text { Find portfolio beta: } & \text { Weight }& \text { Beta } & \text { Product }\ \$ 200,000 & 0.100 & 1.50 & 0.1500 \ \$ 300,000 & 0.150 & -0.50 & -0.0750 \ \$ 500,000 & 0.250 & 1.25 & 0.3125 \ \$ 1,000,000 & \underline{0.500} & 0.75 & \underline{0.3750} \ \$ 2,000,000 & 1.000 &&0.7625 \end{array}$ Find RP_M = r_M F1F1F1S1F1F1F10 r_RF = 8.00% r_s = r_RF + b(RP_M)= 13.10%

Calculate the Required Rate of Return for the Wagner Assets