Question
Portfolio risk and return Elle holds a $7,500 portfolio that consists of four stocks. Her investment in each stock, as well as each stocks beta,
Portfolio risk and return
Elle 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 | 0.80 | 18.00% |
| Kulatsu Motors Co. (KMC) | $1,500 | 1.70 | 12.00% |
| Western Gas & Electric Co. (WGC) | $1,125 | 1.20 | 16.00% |
| Mainway Toys Co. (MTC) | $2,250 | 0.60 | 25.50% |
Suppose all stocks in Elles portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
a. Perpetualcold Refrigeration Co.
b. Kulatsu Motors Co.
c. Mainway Toys Co.
d. 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?
a. Kulatsu Motors Co.
b. Perpetualcold Refrigeration Co.
c. Mainway Toys Co.
d. Western Gas & Electric Co.
If the risk-free rate is 4% and the market risk premium is 6%, what is Elles portfolios beta and required return? Fill in the following table:
|
| Beta | Required Return |
|---|---|---|
| Elles portfolio |
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Forecasting Principles And Practice
Authors: Rob J Hyndman, George Athanasopoulos
3rd Edition
0987507133, 978-0987507136
