Portfolio risk and return el holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following tabl Stock Investment Beta Standard Deviation Andalusian Limited (AL) $3,500 0.80 15.00% Tobotics Inc. (TI) $2,000 1.90 11.50% Water and Power Co. (WPC) $1,500 1.15 16.00% Makissi Corp. (MC) $3,000 0.50 28.50%
Portfolio risk and return el holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following tabl Stock Investment Beta Standard Deviation Andalusian Limited (AL) $3,500 0.80 15.00% Tobotics Inc. (TI) $2,000 1.90 11.50% Water and Power Co. (WPC) $1,500 1.15 16.00% Makissi Corp. (MC) $3,000 0.50 28.50%
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:8. Portfolio risk and return
Ariel holds a $10,000 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)
$3,500
0.80
15.00%
Tobotics Inc. (TI)
$2,000
1.90
11.50%
Water and Power Co. (WPC)
Makissi Corp. (MC)
$1,500
1.15
16.00%
$3,000
0.50
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.
Tobotics Inc.
O Water and Power Co.
O Andalusian Limited
Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?
O Makissi Corp.
O Andalusian Limited
○ Tobotics Inc.
O Water and Power Co.
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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