Expected return of a portfolio using beta.

The beta of four stocksP, Q, R, and Sare 0.54, 0.71, 1.25, and 1.47, respectively and the beta of portfolio 1 is 0.99, the beta of portfolio 2 is 0.84, and the beta of portfolio 3 is 1.14. What are the expected returns of each of the four individual assets and the three portfolios if the current SML is plotted with an intercept of 5.0% (risk-free rate) and a market premium of 12.0% (slope of the line)?

To find the expected return, use the CAPM:

The expected return of stock P can be found using the CAPM:

The expected return of stock Q can be found using the CAPM:

The expected return of stock R can be found using the CAPM:

The expected return of stock S can be found using the CAPM:

The expected return of portfolio 1 can be found using the CAPM:

The expected return of portfolio 2 can be found using the CAPM:

The expected return of portfolio 3 can be found using the CAPM: