Problem:
A stock has a beta of 1.1 an expected return of 12.44 percent and lies on the security market line. A risk-free asset is yielding is 3.2 percent. You want to create a $15,000 portfolio that is comprised of these two securities and that will have a portfolio beta of .7.
Required:
Question: What is the expected return on this portfolio?
Note: Be sure to show how you arrived at your answer.