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 |
|---|---|---|---|
| Perpetualcold Refrigeration Co. (PRC) | $3,500 | 0.90 | 18.00% |
| Zaxatti Enterprises (ZE) | $2,000 | 1.30 | 12.00% |
| Western Gas & Electric Co. (WGC) | $1,500 | 1.20 | 18.00% |
| Makissi Corp. (MC) | $3,000 | 0.60 | 19.50% |
Suppose all stocks in Emmas portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Perpetualcold Refrigeration Co.
Zaxatti Enterprises
Makissi Corp.
Western Gas & Electric 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.
Zaxatti Enterprises
Perpetualcold Refrigeration Co.
Makissi Corp.
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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Handbook Of Research Methods And Applications In Empirical Finance
Authors: Adrian R. Bell, Chris Brooks, Marcel Prokopczuk
1st Edition
1782540172, 978-1782540175
