You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings:

. Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.40 15% 35% B 1.10 15% 35% C 0.55 35% 15% D -1.80 35% 15%

a.What is the beta on each portfolio?

b.Which portfolio is riskier?

c.If the risk-free rate of interest were 3 percent and the market risk premium were 6 percent, what rate of return would you expect to earn from each of the portfolios?