Question
Ariel 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
Ariel 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 |
|---|---|---|---|
| Omni Consumer Products Co. (OCP) | $1,750 | 0.80 | 15.00% |
| Zaxatti Enterprises (ZE) | $1,000 | 1.30 | 11.50% |
| Water and Power Co. (WPC) | $750 | 1.15 | 16.00% |
| Flitcom Corp. (FC) | $1,500 | 0.50 | 19.50% |
Suppose all stocks in Ariels portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Flitcom Corp.
Zaxatti Enterprises
Omni Consumer Products Co.
Water and Power Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of standalone risk?
Zaxatti Enterprises
Flitcom Corp.
Water and Power Co.
Omni Consumer Products Co.
If the risk-free rate is 7% and the market risk premium is 9%, what is Ariels portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Ariels portfolio |
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Understanding Financial Risk Management
Authors: Angelo Corelli
1st Edition
0415746183, 978-0415746182
