What is the expected return on a portfolio that is equally


A share has a beta of 1.4 and an expected return of 16%. A risk-free asset currently earns 6.25%.

  1. What is the expected return on a portfolio that is equally invested in the two assets?
  2. If a portfolio of the two assets has a beta of 0.8, what are the portfolio weights?
  3. If a portfolio of the two assets has an expected return of 12%, what is its beta?
  4. If a portfolio of the two assets has a beta of 2.80, what are the portfolio weights?
  5. How do you interpret the weights for the two assets in this case? Explain.

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Finance Basics: What is the expected return on a portfolio that is equally
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