Question
Elle 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
Elle 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 |
|---|---|---|---|
| Perpetualcold Refrigeration Co. (PRC) | $2,625 | 1.00 | 18.00% |
| Kulatsu Motors Co. (KMC) | $1,500 | 1.30 | 11.00% |
| Western Gas & Electric Co. (WGC) | $1,125 | 1.10 | 20.00% |
| Mainway Toys Co. (MTC) | $2,250 | 0.60 | 19.50% |
Suppose all stocks in Elles portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Kulatsu Motors Co.
Mainway Toys Co.
Western Gas & Electric Co.
Perpetualcold Refrigeration Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Perpetualcold Refrigeration Co.
Western Gas & Electric Co.
Mainway Toys Co.
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 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Finance Bundling And Finance Transformation
Authors: Frank Keuper, Kai-Eberhard Lueg
1st Edition
3658042109, 978-3658042103
