Problem:
UPS has a beta of 1.2 and Walmart has a beta of 0.8. The risk-free rate of interest is 4% and the market risk premium is 7%.
Required:
Question: What is the expected return on portfolio with 40% of its money in UPS and the balance in Walmart?
a. 9.91
b. 10.01
c. 10.72
d. 11.85
Note: Please show how to work it out.