Question
Emma 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
Emma 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 | 0.80 | 9.00% |
| Kulatsu Motors Co. (KMC) | $2,000 | 1.50 | 11.50% |
| Water and Power Co. (WPC) | $1,500 | 1.15 | 16.00% |
| Flitcom Corp. (FC) | $3,000 | 0.30 | 22.50% |
Suppose all stocks in Emmas portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Water and Power Co.
Kulatsu Motors Co.
Andalusian Limited
Flitcom Corp.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Kulatsu Motors Co.
Andalusian Limited
Flitcom Corp.
Water and Power Co.
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Emmas portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Emmas portfolio |
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International Finance Putting Theory Into Practice
Authors: Piet Sercu
1st edition
069113667X, 978-0691136677
