Suppose the current risk$-$free is $7\mathrm{.}8$ percent. Company A stock has a beta of $1\mathrm{.}73$ and an

expected return of $16\mathrm{.}7$ percent. $($Assume the CAPM is true$)$

A$.$ What is the risk premium on the market?

B$.$ Company B stock has a beta of $1\mathrm{.}85.$ What is the expected return on the company B stock?

C$.$ Suppose you have invested $$250,000$ in a portfolio of Company A and Company B$,$ and the

beta of the portfolio is $1\mathrm{.}82$

I. How much did you invest in each stock?

II$.$ What is the expected return and beta on the portfolio?

Hint: Since WA $+$ WB $=1$; where W $=$ weight