8. Portfolio risk and return

Elle 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	0.90	12.00%
Tobotics Inc. (TI)	$2,000	1.90	11.00%
Water and Power Co. (WPC)	$1,500	1.10	18.00%
Flitcom Corp. (FC)	$3,000	0.40	28.50%

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

Andalusian Limited

Water and Power Co.

Flitcom Corp.

Tobotics Inc.

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

Tobotics Inc.

Water and Power Co.

Flitcom Corp.

Andalusian Limited

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

	Beta	Required Return
Elles portfolio