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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

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 2.20 12% 38% B 0.80 12% 38% C 0.55 38% 12% D -1.30 38% 12%

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 7 percent, what rate of return would you expect to earn from each of the portfolios?

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