Using the SML Asset W has an expected return of 12.3 percent and a beta of 1.3.

Question:

If the risk-free rate is 4 percent, complete the following table for portfolios of Asset W and a risk-free asset. Illustrate the relationship between portfolio expected return and portfolio beta by plotting the expected returns against the betas. What is the slope of the line that results?

Percentage of Portfolio in Asset W Portfolio Expected Return Portfolio Beta 0%
25 50 75 100 125 150

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