Question
Cheyenne 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
Cheyenne 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 | 18.00% |
| Kulatsu Motors Co. (KMC) | $1,000 | 1.90 | 12.00% |
| Western Gas & Electric Co. (WGC) | $750 | 1.20 | 20.00% |
| Mainway Toys Co. (MTC) | $1,500 | 0.60 | 28.50% |
Suppose all stocks in Cheyennes portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
A) Mainway Toys Co.
B) Andalusian Limited
C) Kulatsu Motors Co.
D) Western Gas & Electric Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of standalone risk?
A) Western Gas & Electric Co.
B)Mainway Toys Co.
C) Andalusian Limited
D) Kulatsu Motors Co.
If the risk-free rate is 4% and the market risk premium is 6%, what is Cheyennes portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Cheyennes portfolio | ? | ? |
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Options Futures And Other Derivatives
Authors: John C. Hull
3rd Edition
0131864793, 9780306457555
