You are considering investing $1,000 in a T-bill that pays 0.05 and a risky portfolio, P,

constructed with 2 risky securities, X and Y.

The weights of X and Y in P are 0.60 and 0.40,

respectively.

X has an expected rate of return of 0.14 and variance of 0.01, and Y has an

expected rate of return of 0.10 and a variance of 0.0081.

Using the formula E(R)=risk free + Beta(market risk - risk free)

why do we put the E(R) found which is 12.4 into the beta?