Astock has a beta of 1.24, an expected return of 13.68 percent, and lies on the security market line. a risk-free asset is yielding 2.8 percent. you want to create a $6,000 portfolio consisting of stock a and the risk-free security such that the portfolio beta is 0.65. what rate of return should you expect to earn on your portfolio?

Expected rate of return on the portfolio is 8.46

Explanation:

RR: Rate of return

Stock has = 13.68, = 1.24

Risk-free asset has = 2.8, = 0

(Yield can be considered equivalent to RR here)

Let be the weight of the assets.

Portfolio's beta is given by:

Beta =  = 0.65

=>

=> = 0.52

=> = 1 - 0.52 = 0.48

Rate of return of the portfolio is given by

RR= = (0.52 * 13.68) + (0.48 * 2.8) = 8.46

answer; (consensus);

answer; ///decision making under risk;