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BU Hotel Inc. has a beta of 2.6 and SHA Hotel Inc. has a beta of 0.90. The return on the market is 10% and

  1. BU Hotel Inc. has a beta of 2.6 and SHA Hotel Inc. has a beta of 0.90. The return on the market is 10% and the risk-free rate is 3%. If you wish to hold a portfolio consisting of BU and SHA Hotel and have a portfolio beta equal to 1.5, what proportion of the portfolio must be in BU Hotel? What is the expected return on the portfolio?

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