Question
Cheyenne 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
Cheyenne 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 | 18.00% |
| Kulatsu Motors Co. (KMC) | $1,500 | 1.30 | 12.00% |
| Western Gas & Electric Co. (WGC) | $1,125 | 1.20 | 18.00% |
| Mainway Toys Co. (MTC) | $2,250 | 0.60 | 19.50% |
Suppose all stocks in Cheyennes portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Mainway Toys Co.
Andalusian Limited
Western Gas & Electric Co.
Kulatsu Motors Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Mainway Toys Co.
Western Gas & Electric Co.
Andalusian Limited
Kulatsu Motors Co.
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Cheyennes portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Cheyennes portfolio |
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