I need help solving this hmw problem

2. (40 points) Your current portfolio consists of three assets, the common stock of Citi group (c) and Kellogg Co. (k) combined with an investment in the risk free asset. After your empirical analysis, you know the following about the stocks (pi,j denotes the correlation between asset i and j, i denotes the standard deviation of asset i, and m denotes the market portfolio) : Pc, m = 0.3, PK,m = 0.4 "c = 0.8, OK = 0.5 You also have the following information about the market portfolio, and the risk free asset, f: E(rm) = 0.13, rf = 0.04 om = 0.2. Assume that individuals can borrow and lend at riskfree rate ry and that the Capital Asset Pricing Models (CAPM) describes expected returns on assets. You have $200,000 invested in Citi group, $200,000 invested in Kellogg, and $100,000 invested in the riskless asset. Call this portfolio X . (a) (5 points) What is the beta for your portfolio, Bx? A) 1.2 B) 1.1 C) 0.88 D) 0.44 E) None of the above Answer : (b) (5 points) According to the CAPM, what should be the expected return from your portfolio X? A) 14.80% B) 13.90% C) 11.92% 601 2088 63 D) 7.96% E) None of the above 3715 5 14796 67,00+ 1562 Answer : 6