Elle holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as well
Question:
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 |
|---|---|---|---|
| Andalusian Limited (AL) | $1,750 | 0.80 | 18.00% |
| Kulatsu Motors Co. (KMC) | $1,000 | 1.90 | 11.00% |
| Three Waters Co. (TWC) | $750 | 1.10 | 16.00% |
| Makissi Corp. (MC) | $1,500 | 0.60 | 28.50% |
Suppose all stocks in Elle’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Makissi Corp.
Andalusian Limited
Three Waters Co.
Kulatsu Motors Co.
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.
Kulatsu Motors Co.
Makissi Corp.
Andalusian Limited
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Elle’s portfolio’s beta and required return? Fill in the following table:
Beta | Required Return | |
|---|---|---|
| Elle’s portfolio |
Expert Answer:
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham
