A Portfolio Consists of One Risky Asset and One Risk-Free

Multiple Choice

A portfolio consists of one risky asset and one risk-free asset. The risky asset has an expected return of 13.2 percent and a beta of 1.43. The risk-free asset has an expected return of 3.8 percent. How much of the portfolio is invested in the risk-free asset if the portfolio beta is 1.06?

A) 26 percent
B) 34 percent
C) 42 percent
D) 65 percent
E) 74 percent