Imagine you are managing

Imagine you are managing

Imagine you are managing the following 4-stock portfolio for your well to do little sister: Stock Amount Invested Beta A $400,000 1.22 B $800,000 0.84 C $1,200,000 1.0 D $500,000 1.66 Last year the return on your sister?s 4-stock portfolio was 14.75% and the risk premium on the market, RPM, was 6.6% at that time. Now assume your sister asks you to sell all of her holdings of Stock B and use the proceeds from the sale to invest in stock A. Under the assumption that both the risk free rate of return and the risk premium on the market have remained constant, what will be the portfolio?s required rate of return after you execute the trade for your sister?

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