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Portfolio Required Return
You are the money manager of a $10 million investment fund, which consists of four stocks. This fund has the following investments and betas:
| Stock | Investment | Beta |
| A | $3,000,000 | 1.50 |
| B | $1,000,000 | (0.50) |
| C | $2,000,000 | 1.25 |
| D | $4,000,000 | 0.75 |
If the market’s required rate of return is 12 percent, and the risk-free rate is 4 percent, what is the fund’s required rate of return?
The required rate of return (RRR) is the minimum return an investor will accept for owning a company’s stock, as compensation for a given level of risk associated with holding the stock. The RRR is also used in corporate finance to analyze the profitability of potential investment projects
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