Question

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3. Portfolio risk and return 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: Stock Omni Consumer Products Co. (OCP) Kulatsu Motors Co. (KMC) Water and Power Co. (WPC) Fitcom Corp. (FC) Investment $1,750 $1,000 $750 $1,500 Beta 1.00 1.50 1.15 0.40 Standard Deviation 12.00% 11.50% 20.00% 22.50% Suppose all stocks in Elle's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Kulatsu Motors Co. Omni Consumer Products Co. Water and Power Co. Flitcom Corp Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? Omni Consumer Products Co. Water and Power Co. Okulatsu Motors Co. Fitcom Corp.

Answer 1

E47 fr =C47*D47 =C4747 ДА В DE 46 Asset 47 OCP 48 KMC 49 WPC 50 FC Market value Weights in portfolio 1,750 0.350 $ 1,000 0.200 $ 750 0.150 $ 1,500 0.300 beta 1.00 1.50 1.15 0.40 Weighted beta 0.35 0.30 0.17 0.12 51 52 Total S 5,000 1.000 53 Portfolio beta 0.94 54 55 56 Portfolio required return =Rf+BxRp 57 Rf is risk free return 58 Rp is risk premium 15.01% 62 Required return on portfolio 15.01%

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