| beta | required |
| 0.875/1.313/.744/.586 | 7.22/10.64/5.75/9.25 |
| |
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 Standard Deviation 9.00% 11.00% 16.00% 25.50% Stock Omni Consumer Products Co. (OCP) Zaxatti Enterprises (ZE) Western Gas & Electric Co. (WGC) Mainway Toys Co. (MTC) Investment $1,750 $1,000 $750 $1,500 Beta 0.80 1.70 1.10 0.30 Suppose all stocks in Elle\'s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Suppose all stocks in the portfolio were equally weighted Which of these stocks would have the least amount of standalone risk? Western Gas & Electric Co O Zaxatti Enterprises Mainway Toys Co Western Gas & Electric Co 0 Omni Consumer Products Co O Zaxatti Enterprises 0 Omni Consumer Products Co Mainway Toys Co If the risk-free rate is 4% and the market risk premium is 6%, what is Elle\'s portfolio\'s beta and required return? Fi in the following table Beta Required Return Elle\'s portfolio
Mainway Toy Co will contribute to least market risk as beta for Mainway Toy is least as compared to others.
Omni consumer products co will contribute to least amount of standalone risk as standard deviation for this portfolio least as compared to others.
Given risk free return = 4%
Market risk premium = 6%
Elle\'s portfolio beta would equal to weighted average of all
beta = (1750*0.8+1000*1.7+750*1.1+1500*0.3)/(1750+1000+750+1500) = 0.875
Therefore, elle\'s portfolio\'s beta is 0.875
Hence, the required return will be = (risk free return)+(Market risk premium)*(portfolio beta)
Required return = 4+6*0.875 = 9.25
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