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Cheyenne holds a $5,000 portfolio that consists of four stocks. Her investment in each stock, as...

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 following table:

Stock

Investment

Beta

Standard Deviation
Omni Consumer Products Co. (OCP) $1,750 1.00 9.00%
Tobotics Inc. (TI) $1,000 1.30 11.00%
Western Gas & Electric Co. (WGC) $750 1.10 20.00%
Makissi Corp. (MC) $1,500 0.30 19.50%

Suppose all stocks in Cheyenne’s portfolio were equally weighted. Which of these stocks would contribute the least market risk to the portfolio?

Western Gas & Electric Co.

Tobotics Inc.

Makissi Corp.

Omni Consumer Products Co.

Suppose all stocks in the portfolio were equally weighted. Which of these stocks would have the least amount of stand-alone risk?

Omni Consumer Products Co.

Makissi Corp.

Tobotics Inc.

Western Gas & Electric Co.

If the risk-free rate is 7% and the market risk premium is 8.5%, what is Cheyenne’s portfolio’s beta and required return? Fill in the following table:

Beta

Required Return
Cheyenne’s portfolio      
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