9. Conceptualquestions on portfolio and stand-alone riskDarnell holds a $5,000 portfolio that consists of four stocks. His investment in each stock, as well as each stock's beta, is listed in the following table:StockOmni Consumer Products Co. (OCP)Kulatsu Motors Co(KMC)Three Waters Co. (TWC)Makissi Corp. (MC)Investment$1,750$1,000$750$1,500Beta Standard Deviation0.901.301.100.6018.00%11.00%18.00%19.50%Suppose all stocks in Darnell's portfolio were equally weighted. The stock that would contribute the least systematic risk to the portfolio isMakissi Corp.Further, if all of the stocks in the portfolio were equally weighted, the stock that would have the least amountof unsystematic risk is Omni Consumer Products Co.If the risk-free rate is 4.00% and the market risk premium is 6.50%, then Darnell's portfolio will exhibit a beta ofand a required return of

The given information related to the beta & standard deviations for the four stocks are:

Answered: Darnell holds a $5,000 portfolio that…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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8. Portfolio risk and return Emma holds a $10,000 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 Omni Consumer Products Co. (OCP) $3,500 1.00 15.00% Kulatsu Motors Co. (KMC) $2,000 1.30 11.00% Three Waters Co. (TWC) $1,500 1.10 20.00% Flitcom Corp. (FC) $3,000 0.50 19.50% Suppose all stocks in Emma’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? a. Omni Consumer Products Co. b. Flitcom Corp. 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. Flitcom Corp. b. Three Waters Co. c. Kulatsu Motors Co. d. Omni Consumer Products Co. If the risk-free rate is 4% and the market…
9. Portfolio beta and weights Rafael is an analyst at a wealth management firm. One of his clients holds a $10,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Atteric Inc. (AI) Arthur Trust Inc. (AT) Li Corp. (LC) Transfer Fuels Co. (TF) Investment Allocation O 0.9009 percentage points O 1.4322 percentage points 35% 20% 15% 30% 1.1550 percentage points O 1.3283 percentage points Beta 0.900 1.400 1.100 0.300 O Undervalued Standard Deviation Rafael calculated the portfolio's beta as 0.850 and the portfolio's required return as 8.6750%. Rafael thinks it will be a good idea to reallocate the funds in his client's portfolio. He recommends replacing Atteric Inc.'s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50%. 23.00% 27.00% According to Rafael's recommendation, assuming that…
9. Conceptualquestions on portfolio and stand-alone risk Manuel holds a $5,000 portfolio that consists of four stocks. His 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) $1,750 0.90 18.00% $1,000 1.30 11.00% Kulatsu Motors Co(KMC) Water and Power Co. (WPC) Makissi Corp. (MC) $750 1.10 18.00% $1,500 0.60 19.50% Suppose all stocks in Manuel's portfolio were equally weighted. The stock that would contribute the least systematic risk to the portfolio Further, if all of the stocks in the portfolio were equally weighted, the stock that would have the is least amount of unsystematic risk is If the risk-free rate is 4.00% and the market risk premium is 6.50%, then Manuel's portfolio will exhibit a beta of and a required return of
Brandon is an analyst at a wealth management firm. One of his clients holds a $10,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 23.00% Arthur Trust Inc. (AT) 20% 1.500 27.00% Li Corp. (LC) 15% 1.100 30.00% Transfer Fuels Co. (TF) 30% 0.500 34.00% Brandon calculated the portfolio’s beta as 0.8775 and the portfolio’s expected return as 8.83%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Round your…
Portfolio risk and return Emma holds a $7,500 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 Andalusian Limited (AL) $2,625 0.80 15.00% Kulatsu Motors Co. (KMC) $1,500 1.90 11.00% Water and Power Co. (WPC) $1,125 1.10 16.00% Makissi Corp. (MC) $2,250 0.50 28.50% Suppose all stocks in Emma’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Kulatsu Motors Co. Makissi Corp. Andalusian Limited Water and Power Co. Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? Water and Power Co. Makissi Corp. Andalusian Limited…
Portfolio risk and return Emma holds a $7,500 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 Andalusian Limited (AL) $2,625 0.80 15.00% Kulatsu Motors Co. (KMC) $1,500 1.90 11.00% Water and Power Co. (WPC) $1,125 1.10 16.00% Makissi Corp. (MC) $2,250 0.50 28.50% If the risk-free rate is 7% and the market risk premium is 8.5%, what is Emma’s portfolio’s beta and required return? Fill in the following table: If the risk-free rate is 7% and the market risk premium is 8.5%, what is Emma’s portfolio’s beta and required return? Fill in the following table: BETA 0.9750 REQUIRED RETURN 0.8288 867.50% 0.6533 2,232.50% 1.4625 15.29% 1,895.96%
Rafael is an analyst at a wealth management firm. One of his clients holds a $10,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.900 23.00% Arthur Trust Inc. (AT) 20% 1.400 27.00% Li Corp. (LC) 15% 1.100 30.00% Transfer Fuels Co. (TF) 30% 0.300 34.00% Rafael calculated the portfolio’s beta as 0.850 and the portfolio’s required return as 8.6750%. Rafael thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Rafael’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Do not round…
9. Portfolio beta and weights Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 38.00% Arthur Trust Inc. (AT) 20% 1.400 42.00% Li Corp. (LC) 15% 1.300 45.00% Transfer Fuels Co. (TF) 30% 0.500 49.00% Brandon calculated the portfolio’s beta as 0.888 and the portfolio’s required return as 12.6600%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 6%, and the market risk premium is 7.50%. A. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s…
Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 38.00% Arthur Trust Inc. (AT) 20% 1.500 42.00% Li Corp. (LC) 15% 1.100 45.00% Baque Co. (BC) 30% 0.300 49.00% Brandon calculated the portfolio’s beta as 0.818 and the portfolio’s required return as 8.4990%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Baque Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? (Note: Do not round your…
Portfolio beta and weights Brandon is an analyst at a wealth management firm. One of his clients holds a $5,000 portfolio that consists of four stocks. The investment allocation in the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.750 38.00% Arthur Trust Inc. (AT) 20% 1.500 42.00% Li Corp. (LC) 15% 1.100 45.00% Baque Co. (BC) 30% 0.300 49.00% Brandon calculated the portfolio’s beta as 0.818 and the portfolio’s required return as 8.4990%. Brandon thinks it will be a good idea to reallocate the funds in his client’s portfolio. He recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Baque Co. The risk-free rate is 4%, and the market risk premium is 5.50%. According to Brandon’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change?…
Gregory is an analyst at a wealth management firm. One of his clients holds a $7,500 portfolio that consists of four stocks. The investment allocation In the portfolio along with the contribution of risk from each stock is given in the following table: Stock Investment Allocation Beta Standard Deviation Atteric Inc. (AI) 35% 0.900 53.00% Arthur Trust Inc. (AT) 20% 1.400 57.00% Lobster Supply Corp. (LSC) 15% 1.100 60.00% Transfer Fuels Co. (TF) 30% 0.500 64.00% Gregory calculated the portfolio's beta as 0.910 and the portfolio's required return as 12.8250%. Gregory thinks it will be a good idea to reallocate the funds in his client's portfolio. He recommends replacing Atteric Inc.'s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 6%, and the market risk premium is 7.50%. According to Gregory's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? (Note: Do not round your Intermediate…
Portfolio risk and return Ariel holds a $7,500 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 Andalusian Limited (AL) $2,625 0.80 9.00% Kulatsu Motors Co. (KMC) $1,500 1.90 12.00% Water and Power Co. (WPC) $1,125 1.20 16.00% Makissi Corp. (MC) $2,250 0.30 28.50% Suppose all stocks in Ariel’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Makissi Corp. Water and Power Co. Andalusian Limited 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. Andalusian Limited Water and Power Co. Makissi Corp. If the risk-free rate is 4% and the market risk premium is 5.5%, what is Ariel’s portfolio’s…

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