Question
8. Portfolio risk and return Cheyenne holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stocks
8. Portfolio risk and return
Cheyenne 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 |
|---|---|---|---|
| Andalusian Limited (AL) | $1,750 | 1.00 | 12.00% |
| Zaxatti Enterprises (ZE) | $1,000 | 1.70 | 11.50% |
| Water and Power Co. (WPC) | $750 | 1.15 | 20.00% |
| Mainway Toys Co. (MTC) | $1,500 | 0.40 | 25.50% |
Suppose all stocks in Cheyennes portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Zaxatti Enterprises
Andalusian Limited
Water and Power Co.
Mainway Toys Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Water and Power Co.
Mainway Toys Co.
Zaxatti Enterprises
Andalusian Limited
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Cheyennes portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Cheyennes portfolio |
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Sport Finance
Authors: Gil Fried, Timothy D. DeSchriver, Michael Mondello
4th Edition
1492559733, 978-1492559733
