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Homework answers / question archive / Consider the following information, and then calculate the required rate of return for the Scientific Investment Fund
Consider the following information, and then calculate the required rate of return for the Scientific Investment Fund. The total investment in the fund is R2 million. The market required rate of return is 15 percent, and the risk-free rate is 7 percent.
Share Investment Beta
1 R 200,000 1.50
2 300,000 -0.50
3 500,000 1.25
4 1,000,000 0.75
Computation of the required rate of return:-
Required rate of return = Risk free rate + Beta * (Market return - Risk free rate)
= 7% + 0.76 * (15% - 7%)
= 7% + (0.76 * 8%)
= 7% + 6.1%
= 13.1%
