The risk free rate is 4%, and the required return on the market is 12%.

a) What is the required return on an asset with a beta of 1.5?

b) What is the reward/risk ratio given the required rate of return from (a)?

c) What is the required return on a portfolio consisting of 40% of the asset above and the rest in an asset with an average amount of systematic risk? (hint: asset with an average amount of systematic risk has beta of 1)

d) What is the required return on a portfolio consisting of 30% of the asset above and the rest in an asset with a risk free asset?

Answer rating: 100% (QA)

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