**4. Portfolio Expected Return. **You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 11 percent. If your goal is to create a portfolio with an expected return of 12.4 percent, how much money will you invest in Stock X? In Stock Y?

**7. Calculating Returns and Standard Deviations.** Based on the following information, calculate the expected return and standard deviation for the two stocks.

**17. Using CAPM. **A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent.

**a. **What is the expected return on a portfolio that is equally invested in the two assets?

**b. **If a portfolio of the two assets has a beta of .7, what are the portfolio weights?

**c. **If a portfolio of the two assets has an expected return of 9 percent, what is its beta?

**d.** If a portfolio of the two assets has a beta of 2.3, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.

**29. SML Suppose you observe the following situation:**

**a. **Calculate the expected return on each stock.

**b. **Assuming the capital asset pricing model holds and stock A’s beta is greater than stock B’s beta by .25, what is the expected market risk premium?