I have a 4 million dollar investment fund it consists of 4 stocks stock investment beta a 400000 1

please see the attached file for full solution.

First, you need to find the required rate of return for each stock by using CAPM approach. Under CAPM or Capital Asset Pricing Model approach, we can substitute the values given into the CAPM equation to estimate the stock's required rate of return.

rs = rf + (rm - rf)b where rs is the stock's required rate of return
rm is the market required rate of return
rf is the risk free rate
b is the beta

Stock A

rs = 6% + (14% - 6%)1.50
rs = 18.00%

Stock B

rs = 6% + (14% - 6%)-0.50
rs = 2.00%

Stock C

rs = 6% + (14% - 6%)1.25
rs = 16.00%

Stock D

rs = 6% + (14% - 6%)0.75
rs = 12.00%

Next, you need to find the weight of investment in each stock and multiply them with the required rate for each stock as follows: -

stock investment Weight
a 400000 400000/4000000 = 0.10
b 600000 600000/4000000 = 0.15
c 1000000 1000000/4000000 = 0.25
d 2000000 2000000/4000000 = 0.50
Total 4000000

stock Required rate x Weight
a 18.00% x 0.10 = 1.80%
b 2.00% x 0.15 = 0.30%
c 16.00% x 0.25 = 4.00%
d 12.00% x 0.50 = 6.00%
Total 12.10%