Question
9. Portfolio risk and return Elle holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stocks
9. Portfolio risk and return
Elle holds a $7,500 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 |
|---|---|---|---|
| Omni Consumer Products Co. (OCP) | $2,625 | 1.00 | 15.00% |
| Zaxatti Enterprises (ZE) | $1,500 | 1.50 | 11.00% |
| Three Waters Co. (TWC) | $1,125 | 1.10 | 20.00% |
| Flitcom Corp. (FC) | $2,250 | 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?
Omni Consumer Products Co.
Zaxatti Enterprises
Three Waters Co.
Flitcom Corp.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of standalone risk?
Omni Consumer Products Co.
Flitcom Corp.
Zaxatti Enterprises
Three Waters Co.
If the risk-free rate is 7% and the market risk premium is 9%, what is Elles portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Elles portfolio | ? | ? |
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Finance
Authors: Angelico Groppelli, Ehsan Nikbakht
7th Edition
1438010362, 9781438010366
