Compute the expected return of portfolio on the facts

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Compute the expected return of portfolio on the facts narrated.

A stock has a beta of 0.8 and an expected return of 13 percent. A risk-free asset currently earns 4 percent.

(a) What is the expected return on a portfolio that is equally invested in the two assets?

(b) If a portfolio of the two assets has a beta of 0.6, what are the portfolio weights?

(c) If a portfolio of the two assets has an expected return of 11 percent, what is its beta?

(d) If a portfolio of the two assets has a beta of 1.60, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.

Reference no: EM13356910

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