Question
Emma 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
Emma 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 |
|---|---|---|---|
| Perpetualcold Refrigeration Co. (PRC) | $1,750 | 0.80 | 12.00% |
| Tobotics Inc. (TI) | $1,000 | 1.50 | 11.00% |
| Three Waters Co. (TWC) | $750 | 1.10 | 16.00% |
| Makissi Corp. (MC) | $1,500 | 0.40 | 22.50% |
Suppose all stocks in Emmas portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Three Waters Co.
Tobotics Inc.
Perpetualcold Refrigeration Co.
Makissi Corp.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Three Waters Co.
Tobotics Inc.
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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An Introduction to Investment Banks, Hedge Funds, and Private Equity
Authors: David P. Stowell
1st edition
978-0123745033, 0123745039, 978-9380931074
