8. Portfolio risk and return

Ariel holds a $10,000 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
Andalusian Limited (AL)	$3,500	0.80	15.00%
Kulatsu Motors Co. (KMC)	$2,000	1.50	12.00%
Western Gas & Electric Co. (WGC)	$1,500	1.20	16.00%
Makissi Corp. (MC)	$3,000	0.50	22.50%

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

A. Kulatsu Motors Co.

B. Andalusian Limited

C. Western Gas & Electric Co.

D. Makissi Corp.

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

A. Andalusian Limited

B. Makissi Corp.

C. Kulatsu Motors Co.

D. Western Gas & Electric Co.

If the risk-free rate is 4% and the market risk premium is 6%, what is Ariels portfolios beta and required return? Fill in the following table:

	Beta	Required Return
Ariels portfolio	___	_____________