1. The beta coefficient risk. It can be measured by a metric called the beta A stock's contribution to the market risk of a well-diversified portfolio is called coefficient, which calculates the degree to which a stock moves with the move rket. relevant Based on your understanding of the beta coefficient, indicate whether each sta unsystematic lowing table is true or false: Statement True False Stock A's beta is 1.0; this means that the stock moves in the same direction and magnitude as the market. A stock that is more volatile than the market will have a beta of more than 1.0. Higher-beta stocks are expected to have lower required returns. Grade It Now Save & Continue Continue without saving 2. Portfolio expected return and risk A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of the field of finance. Just like stand-alone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the investor's expected rate of return. Analyzing portfolio risk and return involves the understanding of expected returns from a portfolio. Consider the following case: Andre is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following table: Stock Percentage of Portfolio Expected Return Standard Deviation Artemis Inc. 20% 6.00% 30.00% Babish & Co. 30% 14.00% 34.00% Cornell Industries 35% 13.00% 37.00% Danforth Motors 15% 5.00% 39.00% What is the expected return on Andre's stock portfolio? 14.45% 8.03% 10.70% 16.05% = Suppose each stock in Andre's portfolio has a correlation coefficient of 0.4 (p 0.4) with each of the other stocks. If the weighted average of the risk of the individual securities (as measured by their standard deviations) included in the partially diversified four-stock portfolio is 35%, the portfolio's standard deviation (Op) most likely is 35%. Suppose all stocks in Ariel's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? O Makissi Corp. O Water and Power Co. O Omni Consumer Products Co. O Tobotics Inc. Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? O Makissi Corp. O Omni Consumer Products Co. Tobotics Inc. O Water and Power Co. If the risk-free rate is 7% and the market risk premium is 8.5%, what is Ariel's portfolio's beta and required return? Fill in the following table: Beta Required Return Ariel's portfolio eBook Assume that the risk-free rate is 2.5% and the required return on the market is 9%. What is the required rate of return on a stock with a beta of 3? Round your answer to two decimal places. %