8. Portfolio risk and returnAriel 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:StockAndalusian Limited (AL)Zaxatti Enterprises (ZE)Three Waters Co. (TWC)Flitcom Corp. (FC)Suppose all stocks in Ariel's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?O Flitcom Corp.O Three Waters Co.O Andalusian LimitedO Zaxatti EnterprisesO Zaxatti EnterprisesO Three Waters Co.O Andalusian LimitedO Flitcom Corp.Investment Beta Standard Deviation$3,5001.00$2,0001.30$1,5001.20$3,0000.30Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?Ariel's portfolio9.00%12.00%20.00%19.50%If the risk-free rate is 4% and the market risk premium is 5.5%, what is Ariel's portfolio's beta and required return? Fill in the following table:BetaRequired Return

Risk is related to loss from an investment made. It is typically measured by factors such as…

Suppose all stocks in Ariel's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? O Flitcom Corp. Three Waters Co. Andalusian Limited O Zaxatti Enterprises Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? O Zaxatti Enterprises Three Waters Co. Andalusian Limited Flitcom Corp. If the risk-free rate is 4% and the market risk premium is 5.5%, what is Ariel's portfolio's beta and required return? Fill in the following table:

Suppose all stocks in Ariel's portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? O Flitcom Corp. Three Waters Co. Andalusian Limited O Zaxatti Enterprises Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? O Zaxatti Enterprises Three Waters Co. Andalusian Limited Flitcom Corp. If the risk-free rate is 4% and the market risk premium is 5.5%, what is Ariel's portfolio's beta and required return? Fill in the following table:

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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Neha is an analyst at a wealth management firm. One of her 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. 35% 0.750 0.53% Arthur Inc. 20% 1.400 0.57% Li Corp. 15% 1.300 0.60% Transfer Fuels Co. 30% 0.300 0.64% Neha calculated the portfolio’s beta as 0.828 and the portfolio’s expected return as 8.55%. Neha thinks it will be a good idea to reallocate the funds in her client’s portfolio. She recommends replacing Atteric Inc.’s shares with the same amount in additional shares of Transfer Fuels Co. The risk-free rate is 4.00%, and the market risk premium is 5.50%. 1. According to Neha’s recommendation, assuming that the market is in equilibrium, how much will the portfolio’s required return change? 0.86% 0.67% 1.07% 0.99%…
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…
All of the parts are under one question and therfore can be answered per your policy. 8. Portfolio risk and return Ariel 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 0.90 18.00% Tobotics Inc. (TI) $2,000 1.70 11.00% Three Waters Co. (TWC) $1,500 1.10 18.00% Flitcom Corp. (FC) $3,000 0.60 25.50% A. Suppose all stocks in Ariel’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio? Tobotics Inc. Three Waters Co. Flitcom Corp. Omni Consumer Products Co. B. Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk? Flitcom Corp. Tobotics Inc. Omni Consumer Products Co. Three Waters Co.…
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…
Andrew 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. 35% 0.750 0.38% Arthur Inc. 20% 1.500 0.42% Li Corp. 15% 1.300 0.45% Baque Co. 30% 0.500 0.49% Andrew calculated the portfolio's beta as 0.908 and the portfolio's expected return as 10.90%. Andrew 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 5.00%, and the market risk premium is 6.50%. According to Andrew's recommendation, assuming that the market is in equilibrium, how much will the portfolio's required return change? 0.66% 0.44% 0.71% 0.57% Analysts' estimates on expected returns from equity investments are based on…
PART A,B and C are completed. need help in D and E. TIA Unique vs. Market Risk. The figure below shows plots of monthly rates of return on three stocks versus the stock market index. The beta and standard deviation of each stock is given besides its plot. A. Which stock is riskiest to a diversified investor? B. Which stock is riskiest to an undiversified investor who puts all her funds in one of these stocks? C. Consider a portfolio with equal investments in each stock. What would this portfolio’s beta have been? D. Consider a well-diversified portfolio made up of stocks with the same beta as Exxon. What are the beta and standard deviation of this portfolio’s return? The standard deviation of the market portfolio’s return is 20 percent. E. What is the expected rate of return on each stock? Use the capital asset pricing model with a market risk premium of 8 percent. The risk-free rate of interest is 4 percent.
Keith holds a portfolio that is invested equally in three stocks (wDwD = wAwA = wIwI = 1/3). Each stock is described in the following table: Stock Beta Standard Deviation Expected Return DET 0.7 25% 8.0% AIL 1.0 38% 10.0% INO 1.6 34% 13.5% An analyst has used market- and firm-specific information to make expected return estimates for each stock. The analyst’s expected return estimates may or may not equal the stocks’ required returns. The risk-free rate [rRFrRF] is 6%, and the market risk premium [RPMRPM] is 4%. Use the following graph with the security market line (SML) to plot each stock’s beta and expected return. (Note: Click on the points on the graph to see their coordinates.) Stock DETStock AILStock INO00.20.40.60.81.01.21.41.61.82.020181614121086420RATE OF RETURN (Percent)RISK (Beta) A stock is in equilibrium if its required return its expected return. In general, assume that markets and stocks are in equilibrium (or fairly valued),…
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…
Anna holds a portfolio comprising the following 3 stocks: X, Y and Z. Investment Amount $'000 Beta Expected Return Security X 2,000 1.3 Security Y 1,000 1.0 10% Security Z 500 0 2% (a) Determine the expected return of security X. (b) Calculate the return of Anna's portfolio. (c) Calculate the beta of Anna's portfolio.
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…
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…
Jack has $100,000 invested in a 2-stock portfolio. $35,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.50 and Y's beta is 0.70. What is the portfolio's beta? show work in in excel to better understand How is Beta measured and what does it tell us about the risk of the asset?

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