Problem: Assume that you are the portfolio manager of the Desoto Find, a $6.5 million mutual fund that contains the following stocks:
Stock Amount Beta
A $3,500,000 0.80
B $1,250,000 1.05
C $1,000,000 1.25
D $ 750,000 1.30
The required rate of return in the market is 12.2% and the risk-free rate is 5.40%. What rate of return should investors expect (and require) on their investment in this fund?
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