Suppose that you are considering investing in two assets. The first is a riskless asset whose rate of return is 8 percent. The second is a stock whose beta is 0.80 and whose expected return is 13 percent.

(a) What is the expected return on a portfolio equally invested in the two assets? (b) If a portfolio comprised of the two assets has a beta of 0.40, what are the portfolio weights for each of the two assets? (c) If a portfolio comprised of the two assets has an expected return of 11.5 percent, what is the beta of the portfolio? (d) If a portfolio comprised of the two assets has a beta of 1.50, what are the portfolio weights on each of the two assets? How do we interpret the weight for the riskfree asset?