Portfolio required rate of return following the change


Problem:

A money manager is holding the following portfolio:

Stock    Amount Invested    Beta
1    $300,000    0.6
2    300,000     1.0
3    500,000     1.4
4    500,000     1.8

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?

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Finance Basics: Portfolio required rate of return following the change
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