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

Multiple Choice

Laura has one risk-free asset and one risky stock in her portfolio. The risk-free asset has an expected return of 3.2%. The risky asset has a beta of 1.3 and an expected return of 14.9%. What is the expected return on the portfolio if the portfolio beta is .975?

A) 7.65%
B) 9.83%
C) 10.73%
D) 11.98%
E) 12.37%