Stock J has a beta of 1.17 and an expected return of 14.4 percent,while Stock K has a beta of 0.68 and an expected return of 7.6 percent.You want a portfolio with the same risk as the market.What is the expected return of your portfolio?
A)10.67 percent
B)11.18 percent
C)11.62 percent
D)12.04 percent
E)13.13 percent

Question

Quizplus · Accepted Answer

β_P = 1.0 = 1.17x + 0.68(1 - x)x = 0.653061E(R_P) = 0.653061(0.144) + (1 - 0.653061)(0.076) = 12.04 percent

Stock J Has a Beta of 1