Risk-free return is 4%. The S&P 500 portfolio (market) has a standard deviation of 25% and a return of 12%. SNO has a standard deviation of 20% and a 75% correlation with the S&P 500.

a. Estimate the beta for SNO and use it in the Capital Asset Pricing Model to estimate the return.

b. Instead of investing in SNO, you want to combine the risk-free asset and the market portfolio. How much would you need to invest in the risk-free asset and the market portfolio to get the same standard deviation as SNO? What is the beta and return of that portfolio?