Delbert Plans to Invest $1,000,000 in the Stock Market The S&P 500 Is Expected to Return 10

Essay

Delbert plans to invest $1,000,000 in the stock market. He plans to invest $215,000 in stock A, $250,000 in stock B, 165,000 in stock C, 242,500 in stock D and the rest in stock E. The stocks have the following betas:
$$\begin{array}{l}\text { Beta }\begin{array} { c c c c c } \text { Stock A } & \text { Stock B } & \text { Stock C } & \text { Stock D } & \text { Stock E } \\\hline 1.8 & 0.6 & 1.4 & 0.95 & 1.6\end{array}\end{array}$$ The S&P 500 is expected to return 10.4% next year and T-bonds are yielding 5.1%. Based on the CAPM, what is the expected return on Delbert's portfolio?