We can construct an asset's return mimicking portfolio by combining the risk-free portfolio and the market portfolio.

Formula.
We know that: $E(R_s) = R_f + \beta_{s,m} [E(R_m) - R_f]$

Rearranging the equation $\Rightarrow E(R_s) - R_f = \beta_{s,m} [E(R_m) - R_f]$

Since the stock has a beta of 1.6, we will use it into the equation:

$$\begin{aligned} &\Rightarrow E(R_s) - R_f = 1.6 [E(R_m) - R_f] \\ &\Rightarrow E(R_s) - R_f = 1.6E(R_m) - 1.6R_f \\ &\Rightarrow E(R_s) = R_f + 1.6E(R_m) - 1.6R_f \\ &\Rightarrow E(R_s) = -0.6R_f + 1.6E(R_m) \end{aligned}$$

Hence, Ken will have to hold a short position in a risk-free portfolio of 60% and an extended position of 160% in the market portfolio.