Question

Emma hoids a 510,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock's beta, is listed in the following tabie: Suppose all stocks in Emma's portfolio were equally weighted. Which of these stocks would contribute the least mariket risk to the portfolio? Zaxatti Enterprises water and Power co. Omni Consumer Products Co Makissi Corp. Suppose all stocks in the portfollo were equally welghted. Which of these stocks would have the least amount of stand-alone risk? Makissi Corp. Water and Power Co Zaxatti Enterprises Omni Consumer Products Co. If the risk-free rate is 4% and the market risk premium is 5.5%, what is Emma's portfolio's beta and required return? Fill in the foilowing table: Gontinue without

Answer 1

The stock with the lowest beta would contribute the least market risk to the portfolio, while the stock with the lowest standard deviation would have the least stand-alone risk. Emma's portfolio's beta can be calculated by summing up the betas of the individual stocks weighted by their weights, and the required return can be calculated using the risk-free rate and the market risk premium.

Step-by-step explanation:

If all stocks in Emma's portfolio were equally weighted, the stock that would contribute the least market risk to the portfolio would be the stock with the lowest beta. Beta represents the stock's sensitivity to market movements. The lower the beta, the less the stock's price tends to move in relation to the overall market. To determine the stock with the least stand-alone risk, we need to look at the individual stock's volatility or standard deviation of returns. The stock with the lowest standard deviation would have the least stand-alone risk. To calculate Emma's portfolio's beta, we need to sum up the betas of all the stocks in the portfolio, weighted by their respective weights. The required return can be calculated using the formula: required return = risk-free rate + (beta * market risk premium).