3. Portfolio risk and return

Emma holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stocks beta, is listed in the following table:

Stock	Investment	Beta	Standard Deviation
Perpetualcold Refrigeration Co. (PRC)	$1,750	0.80	12.00%
Kulatsu Motors Co. (KMC)	$1,000	1.50	12.00%
Water and Power Co. (WPC)	$750	1.20	16.00%
Mainway Toys Co. (MTC)	$1,500	0.40	22.50%

Suppose all stocks in Emmas portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?

Kulatsu Motors Co.

Mainway Toys Co.

Water and Power Co.

Perpetualcold Refrigeration Co.

Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?

Kulatsu Motors Co.

Mainway Toys Co.

Water and Power Co.

Perpetualcold Refrigeration Co.

If the risk-free rate is 4% and the market risk premium is 5.5%, what is Emmas portfolios beta and required return? Fill in the following table:

	Beta	Required Return
Emmas portfolio