Expected return on a portfolio

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Using CAPM: A stock has a beta of 1.3 and an expected return of 15 percent. A risk free asset currently earns 5.5 percent.

  1. What is the expected return on a portfolio that is equally invested in the two assets?
  2. If a portfolio of the two assets has a beta of .8, what are the portfolio weights?
  3. If a portfolio of the two assets has an expected return of 12 percent, what is its beta?
  4. If a portfolio of the two assets has a beta of 2.60, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.

Reference no: EM131317751

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