How to calculate a portfolio’s required return?
43. Consider the following three individuals’ portfolios consisting of investments in four stocks:
|
Stock |
Beta |
Peter’s Investment |
Paul’s Investment |
Mary’s Investment |
|
Eenie |
1.3 |
2,500 |
5,000 |
10,000 |
|
Meenie |
1.0 |
2,500 |
5,000 |
10,000 |
|
Minie |
0.8 |
2,500 |
5,000 |
-5,000 |
|
Moe |
-0.5 |
2,500 |
-5,000 |
-5,000 |
Required: Assuming that the risk-free rate is 4% and the expected return on the market is 12%, then calculate the required return on Mary’s portfolio.
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