Question
Calculate the expected rate of return on the entire portfolio, if the risk-free rate is 6% and the expected rate of return on market portfolio is 15%.
Solution
Here the CAPM model is used to estimate the return of the portfolio. Return of portfolio = Risk free rate + Portfolio Beta (Market return – Risk free rate) First we need to calculate the portfolio beta as weighted average: 
Now calculating return of portfolio = Risk free rate + Portfolio Beta (Market return – Risk free rate)                                         = 6% + 0.84 (15%-6%)                                         = 13.56%
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