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E8-5 You wish to calculate the risk level of your portfolio based on its beta. The five stocks in the
portfolio with their respective weights and betas are shown in the accompanying table. Calculate the beta of your portfolio.
E8-6 a) Calculate the required rate of return for an asset that has a beta of 1.8, given a risk-free rate of
5% and a market return of 10%. b) If investors have become more
risk-averse due to recent geopolitical events, and the market return rises to
13%, what is the required rate of return for the same asset?
c) Use your findings in part a) to graph the initial security market line (SML), and then use your findings in
part b to graph (on the same set of axes) the shift in the SML.
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