Question
Eileen 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
Eileen 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 |
|---|---|---|---|
| Perpetualcold Refrigeration Co. (PRC) | $3,500 | 1.00 | 12.00% |
| Kulatsu Motors Co. (KMC) | $2,000 | 1.30 | 11.00% |
| Western Gas & Electric Co. (WGC) | $1,500 | 1.10 | 20.00% |
| Makissi Corp. (MC) | $3,000 | 0.40 | 19.50% |
Suppose all stocks in Eileens portfolio were equally weighted. The stock that would contribute the least systematic 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 unsystematic risk is ?
If the risk-free rate is 6.00% and the market risk premium is 8.50%, then Eileens portfolio will exhibit a beta of ? and a required return of ?
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Finance For Managers
Authors: Harvard Business School Press
1st Edition
1578518768, 978-1578518760
