Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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

Perpetualcold Refrigeration Co. (PRC) $3,500 0.90 15.00%
Kulatsu Motors Co. (KMC) $2,000 1.50 12.00%
Water and Power Co. (WPC) $1,500 1.20 18.00%
Makissi Corp. (MC) $3,000 0.50 22.50%

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

Water and Power Co.

Perpetualcold Refrigeration Co.

Makissi Corp.

Kulatsu Motors Co.

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

Perpetualcold Refrigeration Co.

Water and Power Co.

Kulatsu Motors Co.

Makissi Corp.

If the risk-free rate is 7% and the market risk premium is 8.5%, what is Elles portfolios beta and required return? Fill in the following table:

Beta

Required Return

Elles portfolio

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Financial Planning

Authors: Michael A Dalton, Joseph Gillice

3rd Edition

1936602091, 9781936602094

More Books

Students also viewed these Finance questions