Two risky portfolios exist for investing: one is a bond portfolio with a beta of 0.5 and an expected return of 8%, and the other is an equity portfolio with a beta of 1.2 and an expected return of 15%. If these portfolios are the only two available assets for investing, what combination of these two assets will give the following investors their desired level of expected return? What are the betas of each investor’s combination of the bond and equity portfolio?
a. Bart: desired expected return 14%
b. Lisa: desired expected return 12%
c. Maggie: desired expected return 10%

  • CreatedMay 08, 2014
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