Ariel 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 Investment Beta Standard Deviation...




Ariel 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


Investment


Beta


Standard Deviation

Perpetualcold Refrigeration Co. (PRC)$1,7501.0015.00%
Tobotics Inc. (TI)$1,0001.5011.00%
Three Waters Co. (TWC)$7501.1020.00%
Mainway Toys Co. (MTC)$1,5000.5022.50%






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





  • Mainway Toys Co.

  • Tobotics Inc.

  • Three Waters Co.

  • Perpetualcold Refrigeration Co.











Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?





  • Perpetualcold Refrigeration Co.

  • Tobotics Inc.

  • Three Waters Co.

  • Mainway Toys Co.















If the risk-free rate is 7% and the market risk premium is 8.5%, what is Ariel’s portfolio’s beta and required return? Fill in the following table:






















Beta


Required Return

Ariel’s portfolio _________________





Jun 10, 2022
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