4. A money manager is managing the account of a large investor; the investor holds the following stocks:

STOCK AMOUNT INVESTED ESTIMATED BETA

A $2,000,000 0.80

B $5,000,000 1.10

C $3,000,000 1.40

D $5,000,000 ????

The portfolio's required rate of return is 17%; the risk-free rate is 7% and the required return on the average stock in the market is 14%.

Calculate Stock D's estimated beta.

a. 1.256

b. 1.389

c. 1.429

d. 2.026

e. 2.154

Show all work.

STOCK AMOUNT INVESTED ESTIMATED BETA

A $2,000,000 0.80

B $5,000,000 1.10

C $3,000,000 1.40

D $5,000,000 ????

The portfolio's required rate of return is 17%; the risk-free rate is 7% and the required return on the average stock in the market is 14%.

Calculate Stock D's estimated beta.

a. 1.256

b. 1.389

c. 1.429

d. 2.026

e. 2.154

Show all work.

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