You plan to invest in a Hedge Fund, which has a total capital of $1 billion invested in 5 stocks:
StockInvested (mil) Beta
A $2500.80
B $150 1.20
C $300 1.30
D $175 0.90
E $125 1.10
Total$1,000
The risk free rate is 3.80% and you believe the following probability distribution for future market returns is realistic:
ProbabilityMarket Return
0.1 3.5%
0.2 4.5%
0.4 6.0%
0.2 7.5%
0.1 9.5
What is the market required return of the fund portfolio? Show work please
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