We have the following CAPM E(Ri) = .06 + .08 Beta;

a) If Stock X has a beta of 2, what is the required rate of return?

b) If we form a portfolio that is invested 40% in Stock X and 60% in the risk free asset, what is the expected rate of return on that portfolio? What is the beta of that portfolio?

c) Stock Z has a beta of 1.5 and an expected return of 15%. Is at a good buy?

d)Construct a portfolio of Stock X and the risk free asset which has a beta of 1.5.

e) What is the expected return for this purpose?