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Cheyenne holds a $7,500 portfolio that consists of four stocks. Her investment in each stock,...

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Finance

Cheyenne 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
Perpetualcold Refrigeration Co. (PRC) $2,625 0.80 18.00%
Kulatsu Motors Co. (KMC) $1,500 1.90 11.50%
Three Waters Co. (TWC) $1,125 1.15 16.00%
Mainway Toys Co. (MTC) $2,250 0.60 28.50%

Suppose all stocks in Cheyennes portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?

A. Perpetualcold Refrigeration Co.

B. Mainway Toys Co.

C. Three Waters Co.

D. 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?

A. Kulatsu Motors Co.

B. Perpetualcold Refrigeration Co.

C. Mainway Toys Co.

D. Three Waters Co.

If the risk-free rate is 4% and the market risk premium is 5.5%, what are Cheyennes portfolios beta and required return? Fill in the following table:

Beta

Required Return
Cheyennes portfolio ? ?

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