Question
Elle 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
Elle 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 | 12.00% |
| Kulatsu Motors Co. (KMC) | $2,000 | 1.70 | 11.50% |
| Water and Power Co. (WPC) | $1,500 | 1.15 | 20.00% |
| Mainway Toys Co. (MTC) | $3,000 | 0.40 | 25.50% |
Suppose all stocks in Elles portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Water and Power 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?
Water and Power Co.
Mainway Toys Co.
Andalusian Limited
Kulatsu Motors Co.
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Elles portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Elles portfolio |
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Money Banking And Financial Markets
Authors: Stephen Cecchetti, Kermit Schoenholtz
6th Edition
1260226786, 9781260226782
