Suppose that the S&P 500, with a beta of 1.0, has an expected return of 11% and T-bills provide a risk-free return of 6%.

a.What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0?(Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter the value of Expected return as a percentage rounded to 2 decimal places and value of Beta rounded to 2 decimal places.)

Expected Return Beta

(i) 0 __________________% __________________

(ii) 0.25 __________________ % __________________

(iii) 0.50 ___________________% __________________

(iv)0.75 ___________________% __________________

(v)1.0 ___________________ % __________________

b.How does expected return vary with beta?(Do not round intermediate calculations.)

The expected return _____________by_____________% for a one unit increase in beta.