Answer:
11.1022%
Explanation:
We have to calculate the weight of each stock:
Stock A = 1,075,000/ 3,500,000 = 0.307
Stock B = 675,000/ 3,500,000 = 0.192
Stock C = 750,000/ 3,500,000 = 0.214
Stock D = 500,000/ 3,500,000 = 0.14
To find the weight time beta:
Stock A = (1.20 x 0.307) = 0.368
Stock B = (0.50 x 0.192) = 0.096
Stock C = (1.40 x 0.214) = 0.300
Stock D = (0.75 x 0.14) = 0.105
B portfolio = 0.368 + 0.096 + 0.300 + 0.105 = 0.87
Required market return = 11,00%
Risk free rate = 5.00%
Market risk premium = rMarket - rRF = 6.00%
Portfolio's required return = rRF + b*(RPm) = 5% + 0.87*(0.06) = 0.1022
11.00 + 0.1022 = 11.1022%
