Laura has one risk-free asset and one risky stock in her portfolio.The risk-free asset has an expected return of 3.2 percent.The risky asset has a beta of 1.3 and an expected return of 14.9 percent.What is the expected return on the portfolio if the portfolio beta is .975?
A)7.65 percent
B)9.83 percent
C)10.73 percent
D)11.98 percent
E)12.37 percent

Question

Quizplus · Accepted Answer

.975 = 1.3X_A + 0; X_A = .75E(R) = (.75 × 14.9) + [(1 - .75) × 3.2] = 11.98 percent

Laura Has One Risk-Free Asset and One Risky Stock in Her