Question
Carlos holds a $10,000 portfolio that consists of four stocks. His investment in each stock, as well as each stocks beta, is listed in the
Carlos holds a $10,000 portfolio that consists of four stocks. His 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) | $3,500 | 0.80 | 15.00% |
| Kulatsu Motors Co. (KMC) | $2,000 | 1.50 | 12.00% |
| Western Gas & Electric Co. (WGC) | $1,500 | 1.20 | 16.00% |
| Flitcom Corp. (FC) | $3,000 | 0.50 | 22.50% |
Suppose all stocks in Carloss portfolio were equally weighted. The stock that would contribute the least market risk to the portfolio is . Further, if all of the stocks in the portfolio were equally weighted, the stock that would have the least amount of standalone risk is .
If the risk-free rate is 5.00% and the market risk premium is 7.50%, then Carloss portfolio will exhibit a beta of and a required return of
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Introduction To Financial Management
Authors: Sudanshu Pandeya
1st Edition
1774695316, 978-1774695319
