A share has a beta of 1.4 and an expected return of 16%. A risk-free asset currently earns 6.25%.
- What is the expected return on a portfolio that is equally invested in the two assets?
- If a portfolio of the two assets has a beta of 0.8, what are the portfolio weights?
- If a portfolio of the two assets has an expected return of 12%, what is its beta?
- If a portfolio of the two assets has a beta of 2.80, what are the portfolio weights?
- How do you interpret the weights for the two assets in this case? Explain.