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Cheyenne holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stocks beta, is listed in the

Cheyenne holds a $10,000 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) $3,500 1.00 9.00%
Kulatsu Motors Co. (KMC) $2,000 1.90 11.50%
Three Waters Co. (TWC) $1,500 1.15 20.00%
Mainway Toys Co. (MTC) $3,000 0.30 28.50%

Suppose all stocks in Cheyennes portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?

Three Waters Co.

Andalusian Limited

Kulatsu Motors Co.

Mainway Toys Co.

Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?

Andalusian Limited

Mainway Toys Co.

Three Waters Co.

Kulatsu Motors Co.

If the risk-free rate is 4% and the market risk premium is 5.5%, what is Cheyennes portfolios beta and required return? Fill in the following table:

Beta

Required Return

Cheyennes portfolio

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