Question
Elle 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
Elle 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 |
|---|---|---|---|
| Omni Consumer Products Co. (OCP) | $1,750 | 0.90 | 18.00% |
| Zaxatti Enterprises (ZE) | $1,000 | 1.50 | 11.00% |
| Western Gas & Electric Co. (WGC) | $750 | 1.10 | 18.00% |
| Mainway Toys Co. (MTC) | $1,500 | 0.60 | 22.50% |
Suppose all stocks in Elles portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Mainway Toys Co.
Zaxatti Enterprises
Western Gas & Electric Co.
Omni Consumer Products Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Western Gas & Electric Co.
Omni Consumer Products Co.
Zaxatti Enterprises
Mainway Toys 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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