Beta coefficients and the capital asset pricing model Katherine Wilson is wondering how much risk she must undertake to generate an acceptable return on her portfolio. The risk-free return currently is 5%. The return on the overall stock market is 16%. Use the CAPM to calculate how high the beta coefficient of Katherine's portfolio would have to be to achieve each of the following expected portfolio returns.
a. 10%
b. 15%
c. 18%
d. 20%
e. Katherine is risk averse. What is the highest return she can expect if she is unwilling to take more than an average risk?