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A portfolio consists of two assets, Stock A and the risk -free asset (T-bills). Stock A has a beta of 1.2 and an expected return of 14%. The risk-free asset currently earns 4%. If the portfolio of the two assets has a beta of 0.8, what are the weightings of the two assets in the portfolio?
a. Risk-free asset = 33%, stock A = 67%
b. Risk-free asset = 50%, stock A = 50%
c. Risk-free asset = 67%, stock A = 33%
d. Risk-free asset = 3%, stock A = 97%
Please provide the answer with the solution
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