PLEASE ANSWER BOTH QUESTIONS.
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20. Portfolio expected return and risk A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of the field of finance. Just like stand-alone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the investor's expected rate of return. Analyzing portfolio risk and return involves the understanding of expected returns from portfolio. Consider the following case: Andre is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following table: Stock Standard Deviation Percentage of Portfolio 20% Expected Return 6.00% 38.00% 30% 14.00% 42.00% Artemis Inc. Babish & Co. Cornell Industries Danforth Motors 35% 13.00% 45.00% 15% 3.00% 47.00% What is the expected return on Andre's stock portfolio? 0 10.40% O 14.04% O % 15.60% O 7.80% more than less than equal to Suppose each stock in Andre's portfoli of the individual securities (as measur standard deviation (p) most likely is lation coefficient of 0.4 (p = 0.4) with each of the other stocks. If the weighted average of the risk tandard deviations) included in the partially diversified four-stock portfolio is 43%, the portfolio's 43%. % Attempts Average/3 21. Portfolio risk and return Elle holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following table: Stock Investment Beta Standard Deviation $1,750 0.90 18.00% Omni Consumer Products Co. (OCP) Tobotics Inc. (TI) $1,000 1.30 11.00% Western Gas & Electric Co. (WGC) $750 1.10 18.00% Mainway Toys Co. (MTC) $1,500 0.60 19.50% Suppose all stocks in Elle's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? O Mainway Toys Co. O Tobotics O Western Gas & Electric Co. O Omni Consumer Products Co. Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? Tobotics Inc. O Western Gas & Electric Co. Mainway Toys Co. O Omni Con bducts Co. 0.9200 1.3800 If the risk-free rate the market risk premium is 8.5%, what is Elle's portfolio's beta and required return? Fill in the following table: 0.6164 0.7820 Required Return Elle's portfolio Attempts Average/3 21. Portfolio risk and return Elle holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following table: Stock Investment Beta Standard Deviation Omni Consumer Products Co. (OCP) $1,750 0.90 18.00% Tobotics Inc. (TI) $1,000 1.30 11.00% $750 1.10 18.00% Western Gas & Electric Co. (WGC) Mainway Toys Co. (MTC) $1,500 0.60 19.50% Suppose all stocks in Elle's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? O Mainway Toys Co. O Tobotics Inc. O Western Gas & Electric Co. O Omni Consumer Products Co. Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? O Tobotics Inc. O Western Gas & Electric Co. O Mainway Toys Co. O Omni Consumer Products 14.82% If the risk-free rate is 7% and the ma 906.00% hium is 8.5%, what is Elle's portfolio's beta and required return? Fill in the following table: 2,194.00% Beta 1,155.96% urn Elle's portfolio
