A stock has a beta of 1.14 and an expected return of 10.5 percent. A risk-free asset currently earns 2.4 percent (this is essentially the risk-free interest rate).
What is the market risk premium?
What is the expected return on a portfolio that is equally invested in the two assets (i.e. the stock and the risk-free asset)?
If a portfolio of the two assets has a beta of 0.92, what is the portfolio weight in the stock?
If a portfolio of the two assets has an expected return of 8.4 percent, what is its beta?