Refer to the previous problem if the risk-free rate is 12


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1.The Terrapins Investment Fund has a total investment of $500 million in five stocks.

Stock              Investment (millions)  Beta

   1                             $150                 .6

   2                              120                1.2

   3                                80                3.0

   4                                90                1.8

   5                                60               1.0

Total                           $500

What is the fund's overall, or weighted average, beta?

3. Refer to the previous problem. If the risk-free rate is 12% and the market risk premium is 6%, what is the required return on the Terrapins Fund?

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Finance Basics: Refer to the previous problem if the risk-free rate is 12
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