A4 a. Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock I has an expected return of 25% and a beta of 1.5. Stock J has an expected return of 20% and a beta of 0.8....

A4 a.

Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock I has an expected return of 25% and a beta of 1.5. Stock J has an expected return of 20% and a beta of 0.8. The risk-free asset’s return is 5%.

a. Calculate the expected returns and betas on portfolios with x% invested in Stock I and the rest invested in the risk-free asset, where x% = 0%, 50%, 100%, and 150%.