4. Conceptual questions on portfolio and stand-alone risk
Antonio 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
Andalusian Limited (AL)
$1,750 0.90
18.00%
Zaxatti Enterprises (ZE)
$1,000 1.30
11.00%
Water and Power Co. (WPC)
$750
1.10
18.00%
Makissi Corp. (MC)
$1,500
0.60
19.50%
Suppose all stocks in Antonio's portfolio were equally weighted. The stock that would contribute the least market 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 standalone risk is
If the risk-free rate is 4.00% and the market risk premium is 6.50%, then Antonio's portfolio will exhibit a beta of
required return of
and a