Emma 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 Perpetualcold Refrigeration Co. (PRC) $1,750 1.00 18.00% Zaxatti Enterprises (ZE) $1,000 1.50 12.00% Water and Power Co. (WPC) $750 1.20 20.00% Flitcom Corp. (FC) $1,500 0.60 22.50%   Suppose all stocks in Emma’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Perpetualcold Refrigeration Co.   Water and Power Co.   Flitcom Corp.   Zaxatti Enterprises     Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? Water and Power Co.   Flitcom Corp.   Zaxatti Enterprises   Perpetualcold Refrigeration Co.     If the risk-free rate is 7% and the market risk premium is 8.5%, what is Emma’s portfolio’s beta and required return? Fill in the following table:   Beta Required Return Emma’s portfolio

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Emma 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
Perpetualcold Refrigeration Co. (PRC) $1,750 1.00 18.00%
Zaxatti Enterprises (ZE) $1,000 1.50 12.00%
Water and Power Co. (WPC) $750 1.20 20.00%
Flitcom Corp. (FC) $1,500 0.60 22.50%
 
Suppose all stocks in Emma’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Perpetualcold Refrigeration Co.
 
Water and Power Co.
 
Flitcom Corp.
 
Zaxatti Enterprises
 
 
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
Water and Power Co.
 
Flitcom Corp.
 
Zaxatti Enterprises
 
Perpetualcold Refrigeration Co.
 
 
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Emma’s portfolio’s beta and required return? Fill in the following table:
 
Beta
Required Return
Emma’s portfolio          
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