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:
$\begin{array}{rr}
\text { Stack }&\text { Investment }&\text { Beta }\
A&\$200,000 & 1.50 \
B&300,000 & -0.50 \
C&500,000 & 1.25 \
D&1,000,000 & 0.75
\end{array}$
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:
 $\begin{array}{rr}
\text { Stack }&\text { Investment }&\text { Beta }\
A&\$200,000 & 1.50 \
B&300,000 & -0.50 \
C&500,000 & 1.25 \
D&1,000,000 & 0.75
\end{array}$
A) 10.67%
B) 11.23%
C) 11.82%
D) 12.45%
E) 13.10%

Quizplus · Accepted Answer

$$\begin{array} { l l } 
\mathrm { T } _ { \mathrm { M } } : & 15.0 \% \
\mathrm { rp } _ { \mathrm { F } } : & 7.0 \%
\end{array}$$ 
 
$\begin{array}{l}
\begin{array} { l } 
\text { Find portfolio beta: } & \text { Weight } \
\$ 200,000 & 0.100 \
\$ 300,000 & 0.150 \
\$ 500,000 & 0.250 \
\$ 1,000,000 & \underline{0.500} \
\$ 2,000,000 & 1.000
\end{array}
\begin{array} { l } 
\text { Beta }& \text { Product } \
1.50&0.1500\
-0.50 & -0.0750 \
1.25 & 0.3125 \
0.75 & 0.3750\
&0.7625
\end{array}
\end{array}$
 
Find RPM = rM - rRF = 8.00% rs = rRF + b(RPM) = 13.10%

Calculate the Required Rate of Return for the Wagner Assets