Elle holds a $7,500 portfolio that consists of four stocks. Her investment in each stock,...
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Finance
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
Omni Consumer Products Co. (OCP)
$2,625
1.00
12.00%
Tobotics Inc. (TI)
$1,500
1.70
11.00%
Western Gas & Electric Co. (WGC)
$1,125
1.10
20.00%
Mainway Toys Co. (MTC)
$2,250
0.40
25.50%
Suppose all stocks in Elles portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Tobotics Inc.
Omni Consumer Products Co.
Mainway Toys 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?
Tobotics Inc.
Western Gas & Electric Co.
Omni Consumer Products Co.
Mainway Toys Co.
If the risk-free rate is 4% and the market risk premium is 5.5%, what is Elles portfolios beta and required return? Fill in the following table:
Beta
Required Return
Elles portfolio
Answer & Explanation
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