Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 2.00%. What rate of return should investors expect (and require) on this fund? Do not round your intermediate calculations. Stock Amount Beta A $1,075,000 1.20 B $675,000 0.50 C $750,000 1.40 D $500,000 0.75 $3,000,000 ?
A. 11.16%
B. 10.82%
C. 9.93%
D. 9.37%
E. 9.71%
Answer: A
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