A portfolio is made up of four stocks:

Expected return Amount Invested

Stock A 16% $100,000

Stock B 12% $200,000

Stock C 18% $200,000

Stock D 20% $100,000

1.The expected return of the portfolio is:

a. 16.50%

b. 16.00%

c. 13.20%

d. 12.50%

e. none of the above.

2. Stock A has a required return of 18% and a beta of 1.4. The expected market return is 14%. What is the risk-free rate?

a. .6%

b. 1.25

c. 3.0%

d. 4.0%

e. 6.0%

3. Kelvin Inc. has required return of 15% and a beta of 2. If the risk-free rate is 3%, calculate the slope of the SML.

a. 1.6%

b. 2.0%

c. 3.0%

d. 4.0%

e. 6.0%