Suppose that CAPM holds and that you hold a portfolio of the market portfolio and the risk-free asset with weights equal to 0.74 and 0.26 respectively. What is the beta of your portfolio?
My questions are;
What does it mean that "CAPM holds"? I've googled this but can't seem to find any answer.
When I tried calculating beta, this is what I did;
$$ r_i=r_f+\beta(r_m-r_f)$$ $$ r_i-r_f=\beta(r_m-r_f) $$ but since the portfolio is the market portfolio, I thought that I could use $r_i=r_m$, so I get
When looking at the answer, they say that the beta of my portfolio is 0.74, but I don't understand why. Any help would be greatly appreciated.