Question
Ariel 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
Ariel 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 |
|---|---|---|---|
| Andalusian Limited (AL) | $2,625 | 0.90 | 9.00% |
| Kulatsu Motors Co. (KMC) | $1,500 | 1.30 | 11.00% |
| Western Gas & Electric Co. (WGC) | $1,125 | 1.10 | 18.00% |
| Makissi Corp. (MC) | $2,250 | 0.30 | 19.50% |
Suppose all stocks in Ariels portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Kulatsu Motors Co.
Makissi Corp.
Western Gas & Electric Co.
Andalusian Limited
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Andalusian Limited
Kulatsu Motors Co.
Makissi Corp.
Western Gas & Electric Co.
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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Public Finance
Authors: Harvey S. Rosen
5th Edition
025617329X, 978-0256173291
