CHAPTER 2 RISK AND RATES OF RETURN

The risk-free rate, kRF, is 5 percent and the portfolio has a required return of 11.655 percent. The manager is thinking about selling all of her holdings of Stock 3, and instead investing the money in Stock 4, which has a beta of 0.9. If she were to do this, what would be the new portfolio’s required return? a. 9.73% b. 11.09% c. 9.91% d. 7.81% ................
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