Elle holds a $10,000 portfolio that consists of four stocks. Her investment in each stock,...
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Elle holds a $10,000 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
Omni Consumer Products Co. (OCP)
$3,500
1.00
9.00%
Kulatsu Motors Co. (KMC)
$2,000
1.30
12.00%
Three Waters Co. (TWC)
$1,500
1.20
20.00%
Flitcom Corp. (FC)
$3,000
0.30
19.50%
Suppose all stocks in Elles portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?
Flitcom Corp.
Omni Consumer Products Co.
Three Waters Co.
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.
Flitcom Corp.
Three Waters Co.
Omni Consumer Products Co.
If the risk-free rate is 7% and the market risk premium is 8.5%, what is Elles portfolios beta and required return? Fill in the following table:
Beta
Required Return
Elles portfolio
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