7. My portfolio holds 2 securities, Microsoft (MSFT) and Tesla (TSLA). MSFT comprises 40% of the portfolio while TSLA makes up the other 60%. The 10-yr Treasury currently yields 1.00%, the corporate tax rate is 50% and US equities carry a 6% premium to the risk-free rate. MSFT has a Beta of 1 and an AA credit rating, giving it a 2% cost of debt. TSLA has a Beta of .5 and a BB credit rating, giving it a 7% cost of debt. Using the Capital Asset Pricing Model (CapM), what is the expected return of my portfolio?

a. 7.7%

b. 5.2%

c. 5.8%

d. 7.8%

e. Not enough information provided