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 |
|---|---|---|---|
| Andalusian Limited (AL) | $1,750 | 1.00 | 12.00% |
| Tobotics Inc. (TI) | $1,000 | 1.70 | 11.50% |
| Three Waters Co. (TWC) | $750 | 1.15 | 20.00% |
| Makissi Corp. (MC) | $1,500 | 0.40 | 25.50% |
Suppose all stocks in Ariels portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Andalusian Limited
Tobotics Inc.
Three Waters Co.
Makissi Corp.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Makissi Corp.
Three Waters Co.
Andalusian Limited
Tobotics Inc.
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Ariels portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Ariels portfolio |
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