D. (8 marks) The following data is available about the market portfolio, the riskless rate, and two risky assets, W and X: The market portfolio has a standard deviation equals 13%, stock X has an expected return equals 20%, standard deviation equals to 16%, and beta equals to 1.4, and stock W has a standard deviation equals to 18% and beta equals to 0.8. The risk-free rate is 2%. Assume that the CAPM holds in the economy.

1. What is the expected return and the beta of the market portfolio? (2 marks)

2. What is the expected return on asset W? (2 marks)

3. Does asset W lie on the Capital Market Line? Explain why or why not. (2 marks)

4. Suppose you invested $102,000 in these two stocks where the beta of your portfolio is 1.25. How much did you invest in each stock? What is the expected return of this portfolio (2 marks)