Bookmarks People Window Help Chegg Study l Guided Solutio x\', e Chegg Study l G

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Bookmarks People Window Help Chegg Study l Guided Solutio x', e Chegg Study l Guided Solutic × quiz?quiz action takeQuiz&quiz;_probGuid-QNAPCOA801010000003e431320080000&ctx; brown1-0012&ckm15138686118; Risk and Rates of Return Graded Assignment Read Chapter Back to Assignment Due Friday 12.22.17 at 11:45 PM Attempts: Do No Harm: 14 5. Portfolio risk and return Aa AaE Cheyenne 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 fo lowing table: Stock Perpetualoold Refrigeration Co. (PRC) ,750 Tobotics Inc. (TI) Three Waters Co. (TWc) Makissi Corp. (MC) InvestmentBeta 0.80 1.30 1.10 0.40 $1,000 $750 $1,500 Standard Deviation 12.00% 11.00% 16.00% 19.50% Suppose all stocks in Cheyenne's portfolio were equally Suppose all stocks in the portfolio were equally weighted. weighted. Which of these stocks would contribute the least market risk to the portfolio? Which of these stocks would have the least amount of standalone risk? O Three Waters Co. Tobotics Inc. O Makissi Corp. O Perpetualcold Refrigeration Co. O Perpetualcold Refrigeration Co. O Tobotics Inc O Three Waters Co. Makissi Corp. If the risk-free rate is 4% and the market risk premium is 6%, what is Cheyenne's portfolio's beta and required return? Fill in the following table: Beta Required Return Cheyenne's portfolio qb

Explanation / Answer

1)

Option C

Since Makissi has low beta

2)

Option A

Since Perpetualcold has low standard deviation

3)

W1 = 1750 / 5000 = 0.35

W2 = 1000 / 5000 = 0.2

W3 = 750 / 5000 = 0.15

W4 = 1500 / 5000 = 0.3

beta = 0.35*0.8 + 0.2*1.3 + 0.15*1.1 + 0.3*0.4 = 0.825

required return = 4% + 0.825*6% = 8.95%

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