Question: Both assets B and C plot on the SML. Asset B has a beta of 1.1 and an expected return of 12.1%. Asset C has

  1. Both assets B and C plot on the SML. Asset B has a beta of 1.1 and an expected return of 12.1%. Asset C has a beta of .80 and an expected return of 7.50%. The risk-free rate is 4% and the expected return on the market portfolio is 11%. If you wish to hold a portfolio consisting of assets B and C, and have a portfolio beta equal to 1.0, what proportion of the portfolio must be in asset B?

0.333

.50

0.75

0.625

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