Suppose Autodesk stock has a beta of 2.16, whereas Costco stock has a beta of 0.69. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, what is the expected return of a portfolio that consists of 60% Autodesk stock and 40% Costco stock, according to the CAPM?

Expected Return = Risk-free Rate + Beta x (Market Return – Risk-free Rate)

For Autodesk Stock: Expected Return = 4% + 2.16 x (10%-4%) = 11.44 %

For Costco Stock: Expected Return = 4% + 0.69 x (10%-4%) = 7.08 %

Overall, the expected return for a portfolio consisting of 60% Autodesk stock and 40% Costco stock is 9.76%:

(60% x 11.44%) + (40% x 7.08%) = 9.76%.