CFAI Reading 30 - Problem 29
The solution states that the return on equity (2million) is 0.5% however, that is the return on the entire portfolio of 5million.
According to the formula in the text, the return on equity is supposed ot be:
Return on funds invested (equity) = rf + b/e (rf-k) which comes out to 0.675% which is the return on equity. However the solution states 0.675% is the portfolio rate of return!
Is this just a wording issue? Portfolio (5million) rate of return is provided in the problem which is 0.5%. |