Question
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 |
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