1a) Consider the CAPM. The expected return on the market is 18%. The expected return on a stock with a beta of 1.1 is 20%. What is the risk-free rate?

1b) UPS, a delivery services company, has a beta of 1.5, and Wal-Mart has a beta of 0.5. The risk-free rate of interest is 6% and the market risk premium is 9%. What is the expected return on a portfolio with 30% of its money in UPS and the balance in Wal-Mart?

a) 13.20%

b) 12.94%

c) 12.54%

d) 13.86%