A stock has a beta of 1.28 and an expected return of 12.6 percent. A risk-free asset currently earns 4.2 percent. Required:

(a) What is the expected return on a portfolio that is equally invested in the two assets?

Expected return %

(b) If a portfolio of the two assets has a beta of 0.88, what are the portfolio weights?

Weight of the stock

Weight of the risk-free asset

(c) If a portfolio of the two assets has an expected return of 11.8 percent, what is its beta?

Beta

(d) If a portfolio of the two assets has a beta of 2.48, what are the portfolio weights?

Weight of the stock

Weight of the risk-free asset