2. Stacy is the manager of a RM10 million mutual fund and he decides to invest in the three stocks with the following amounts and betas.) Stock Invested amount RM (million) Beta A 3 1.5 B 4 0.8 C 3 -0.6 If the market's required rate of return is 12%, and the risk-free rate is 4%, what is the mutual fund's required rate of return? [6 marks]
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To do this, we multiply each stock's beta by its invested amount and sum them up. Weighted average beta = (0.6 * -0.6) + (0.8 * 0.8) + (1.5 * 1.5) = (-0.36) + (0.64) + (2.25) = 2.53 Show more…
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