Question

A stock has a beta of 1.13 and an expected return of 12.1 percent. A risk-free asset currently earns 5 percent.
a. What is the expected return on a portfolio that is equally invested in the two assets?
b. If a portfolio of the two assets has a beta of 0.50, what are the portfolio weights?
c. If a portfolio of the two assets has an expected return of 10 percent, what is its beta?
d. If a portfolio of the two assets has a beta of 2.26, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.


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  • CreatedJune 17, 2015
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