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Assume that you are the portfolio manager of the Coastal Fun

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Assume that you are the portfolio manager of the Coastal Fund, a $3 million hedge fund that contains the following stocks.

The required rate of return on the market is 10.00% and the risk-free rate is 4.00%. What rate of return should investors expect (and require) on this fund?

Amount Beta
Stock A $1,025,000 1.70
Stock B 675,000 0.50
Stock C 750,000 1.40
Stock D 550,000 0.85
$3,000,000

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Solution Summary

This solution provides steps to determine the rate of return investors should expect.

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Stock Weight in Portfolio (Weight Ã- beta)
A 1,025,000/3,000,000= 0.3417 ...

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