Suppose the expected risk-free rate is 5% and the expected return on the market is 12%. Further suppose that you have a portfolio comprised of the four securities, with equal investments in each:
| Security | Security Beta |
| AA | 1.00 |
| BB | 1.25 |
| CC | 1.50 |
| DD | 1.00 |
a. What is the expected return for each security in your portfolio?
b. What is the portfolio’s beta?
c. What is the expected return on your portfolio?
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