Question: 9. (10 points) Assume that both Apple and Yahoo plot on the SML (security market line). Apple has a beta of 2.6 and an expected

9. (10 points) Assume that both Apple and Yahoo plot on

9. (10 points) Assume that both Apple and Yahoo plot on the SML (security market line). Apple has a beta of 2.6 and an expected return of 21.2%. Yahoo has a beta of 0.90 and an expected return of 9.3%. The expected return on the market portfolio is 10% and the risk-free rate is 3%. If you wish to hold a portfolio consisting of Apple and Yahoo and have a portfolio beta equal to 1.5, what proportion of the portfolio must be in Apple? What is the expected retum on the portfolio? Apple Yaho Market Risk-free Portfolio Asset Beta 2.6 0.9 1.0 0.0 Expected 21.2 9.3% 10.0% 3.0% Return % 0

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