Question: Suppose you form a portfolio consisting of a stock and a risk free asset. (i.e. Treasury Bill). You invest $1000 of your own money in the stock. The stock has a beta of 1.4 and an expected return of 16%. You sell short $500 of the risk free asset and invest the proceeds of the short sale in the stock bringing the total investment in the stock to $1500. The risk free rate is 4%.

What is the beta of the portfolio?

What is the expected return on the portfolio?

What is the reward-to-risk ratio of the stock?

What is the reward-to-risk ratio of the portfolio?

What is the reward-to-risk ratio of the risk free asset?