Question 1 PART A: A stock has a beta of 1.2 and an expected return of 14 percent. A risk-free asset currently earns 3.8 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of .20, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 12.50 percent, what is its beta? d. If a portfolio of the two assets has a beta of 1.29, what are the portfolio weights?

PART B: Explain the investment opportunity set, efficient and inefficient portfolios