Question
I need help with this question. I think I have the first two parts correct (answers in bold) but I'm stummped on the last part
I need help with this question. I think I have the first two parts correct (answers in bold) but I'm stummped on the last part by solving for beta and required return. Can you show me the steps?
Nick holds a $5,000 portfolio that consists of four stocks. His investment in each stock, as well as each stocks beta, is listed in the following table:
| Stock | Investment | Beta | Standard Deviation |
|---|---|---|---|
| Omni Consumer Products Co. (OCP) | $1,750 | 0.80 | 15.0000% |
| Kulatsu Motors Co. (KMC) | $1,000 | 1.30 | 11.5000% |
| Western Gas & Electric Co. (WGC) | $750 | 1.15 | 16.0000% |
| Mainway Toys Co. (MTC) | $1,500 | 0.50 | 19.5000% |
Suppose all stocks in Nicks portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Omni Consumer Products Co.
Mainway Toys Co.
Kulatsu Motors Co.
Western Gas & Electric Co.
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of standalone risk?
Mainway Toys Co.
Kulatsu Motors Co.
Western Gas & Electric Co.
Omni Consumer Products Co.
If the risk-free rate is 6.0000% and the market risk premium is 7.5000%, what is Nicks portfolios beta and required return? Fill in the following table:
| Beta | Required Return | |
|---|---|---|
| Nicks portfolio | ? | ? |
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Handbook Of The Economics Of Finance Volume 2A
Authors: George M. Constantinides, Milton Harris, Rene M. Stulz
1st Edition
0444535942, 978-0444535948
