Assume That You Are the Portfolio Manager of the Coastal

question 5

Multiple Choice

Assume that you are the portfolio manager of the Coastal Fund,a $3 million hedge fund that contains the following stocks.The required rate of return on the market is 14.00% and the risk-free rate is 6.00%.What rate of return should investors expect (and require) on this fund? $\begin{array}{lrr} & {\text { Amount }} & \text { Beta } \\\hline \text { Stock A } & \$ 1,075,000 & 1.20 \\\text { Stock B } & 675,000 & 0.50 \\\text { Stock C } & 750,000 & 1.40 \\\text { Stock D } & \underline{500,000} & 0.75\\&\$ 3,000,000\\\end{array}$

• A)13.44%
• B)13.79%
• C)14.14%
• D)14.49%

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