1596& CHOR: Homework. EOC Rosk and Rates of Return Attempts 1T Keep the highesti 1/7 2. Problem 8.06 (Expected Returna) D 1 Tips ss Tips OR. eBook Stocks A and have the following per distributions of expected future returns Probability 0.1 (7N) (3 0.2 6 0 0.5 16 23 0.1 19 25 0.1 31 39 a. Calculate the expected rate of return, s. for Stock B(A - 13.50%.) Do not round intermediate calculations. Hound your answer to two decimal places b. Calculate the standard deviation of expected returns, GA, for Stock A (00 - 19.61%) Do not round Intermediate calculations. Round your answer to two decimal places 5 Now calculate the coefficient of variation for Stock B. Do not round Intermediate calculations. Round your wer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? 1. I Stock is less highly correlated with the market than A, then it might have a lower beathan Stock A, and hence be less risky in a portfolio sense 11. If Stock B is less highly correlated with the market than A, then it might have a higher beathan Stock A, and hence be more risk in a portfolio sense 11. If Stock is more highly correlated with the market than Athen it might have a higher beta than Stock A, and hence be less risky in a portfolio sense IV. If Stock B is more Nighly correlated with the market than A, then it might have a lower bets the stock A, and hence be less risky in a portfolio V. If Stock is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolios c. Assume the risk-free rate is 1.56. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places. Stock A: Stock Are these calculations consistent with the information obtained from the cont of variation calculations in Part > 1. In a stand-alone risk sense A is less risky than 8. If Stock B is more highly correlated with the market than then it might have the same betaas Stock A, and hence be just as risky in a portfolio sense 11. In a stand-alone risk sense A is less risky than 8. I Stock B is less highly correlated with the market than then it might have a better Stock And hence be less risky in a portfolio sense III. In a stand-alone risk sense A is less risky than 8. I Stock is less highly correlated with the market than A, then it might higher beta than Stock A, and hence be more risk in a portfolio IV. In a stand-alone risk sense A is more risky than B. I Stock B is less highly correlated with the market than Athen might have a lower than Stock A, and hence be less risk in a presse V. In a stand-one risk sense is more risky than . If Stock Bites highly correlated with the market than then might have a higher beathan Sock A, and hence be more risky na portato sense Grade it Now Save and Come without saving
