Portfolio Risk and Return. Suppose that the S&P $500,$ with a beta of $1\mathrm{.}0,$ has an expected

return of $10\%$ and T$-$bills provide a risk$-$free return of $4\%.($LO$12-1)$

a$.$ How would you construct a portfolio from these two assets with an expected return of $8\%?$

Specifically, what will be the weights in the S&P $500$ versus T$-$bills?

b$.$ How would you construct a portfolio from these two assets with a beta of $.4?$

c$.$ Find the risk premiums of the portfolios in parts $($a$)$ and $($b$),$ and show that they are propor$-$

tional to their betas.