Portfolio risk and return Ariel holds a $7,500 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) $2,625 0.80 9.00% Kulatsu Motors Co. (KMC) $1,500 1.90 12.00% Water and Power Co. (WPC) $1,125 1.20 16.00% Makissi Corp. (MC) $2,250 0.30 28.50%   Suppose all stocks in Ariel’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Makissi Corp.   Water and Power Co.   Andalusian Limited   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? Kulatsu Motors Co.   Andalusian Limited   Water and Power Co.   Makissi Corp.     If the risk-free rate is 4% and the market risk premium is 5.5%, what is Ariel’s portfolio’s beta and required return? Fill in the following table:   Beta Required Return Ariel’s portfolio

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Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.