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Emma 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

Emma 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 0.90 9.00%
Kulatsu Motors Co. (KMC) $1,500 1.90 11.50%
Western Gas & Electric Co. (WGC) $1,125 1.15 18.00%
Mainway Toys Co. (MTC) $2,250 0.30 28.50%

Suppose all stocks in Emmas portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?

Kulatsu Motors Co.

Mainway Toys Co.

Perpetualcold Refrigeration Co.

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.

Kulatsu Motors Co.

Perpetualcold Refrigeration Co.

Mainway Toys Co.

If the risk-free rate is 4% and the market risk premium is 5.5%, what is Emmas portfolios beta and required return? Fill in the following table:

Beta Required Return
Emmas portfolio

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