$6$

$-$

$1$

$7$

$.$

$($

Security market line

$)$

a

$.$

$$Determine the expected return and beta for the following portfolio:

STOCK PERCENTAGE OF PORTFOLIO BETA EXPECTED RETURN

$1$

$4$

$0$

$\%$

$1$

$.$

$0$

$0$

$1$

$2$

$\%$

$2$

$2$

$5$

$\%$

$0$

$.$

$7$

$5$

$1$

$1$

$\%$

$3$

$3$

$5$

$\%$

$1$

$.$

$3$

$0$

$1$

$5$

$\%$

b

$.$

$$Given the foregoing information, draw the security market line and show

where the securities and portfolio fit on the graph. Assume that the riskfree

rate is

$2$

$$percent and that the expected return on the market portfolio is

$8$

$$percent$.$ How would you interpret these findings?

MyLab

X

MyLab