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?© BrainMass Inc. brainmass.com October 9, 2019, 6:39 pm ad1c9bdddf
Calculates required rate of return of portfolio using CAPM (Capital Asset Pricing Model).