Both Assets B and C Plot on the SML

question 67

Multiple Choice

Both assets B and C plot on the SML.Asset B has a beta of 1.1 and an expected return of 12.1%.Asset C has a beta of .80 and an expected return of 7.50%.The risk-free rate is 4% and the expected return on the market portfolio is 11%.If you wish to hold a portfolio consisting of assets B and C,and have a portfolio beta equal to 1.0,what proportion of the portfolio must be in asset B?

• A)0.333
• B)0.50
• C)0.625
• D)0.75

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