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Joel Foster is the portfolio manager of the SF Fund, a $3 million hedge fund that contains the following stocks. The required rate of return on the market is 11.00% and the risk-free rate is 5.00%. What rate of return should investors expect (and require) on this fund?

Stock Amount Beta

A $1,075,000 1.20

B 675,000 0.50

C 750,000 1.40

D 500,000 0.75

TOTAL $3,000,000

Please show how you arrived at your answer. I am interest in how the problem is solved, not just the answer.

Financial Management, Finance

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