Someone who believes that the collection of all stocks satisfies a single-factor model with the market portfolio serving as the factor gives you information on three stocks which make up a portfolio. (See Table below) In addition, you know that the market portfolio has an expected rate of return of 12% and ad standard deviation of 18%. The risk-free rate is 5%. (a) What is the portfolios expected rate of return? (b) Assuming the factor model is accurate, what is the standard deviation of this rate of return?

Stock Beta Standard deviation of random error term Weight in portfolio

A 1.10 7.0% 20%

B 0.80 2.3% 50%

C 1.00 1.0% 30%