1.Stock X has a 10% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns.Stock Y has a 12.5% expected return, a beta coefficient of 1.2 and a 25% standard deviation.The risk-free rate is 6% and the market risk premium is 5%.

(i)Calculate each stock's coefficient of variation.

(ii)Which stock is riskier for a diversified investor?

(iii)Calculate each stock's required rate of return.

(iv)Based on the two stocks expected and required rates pf return which stock would be more attractive to a diversified investor?

(v)Calculate the required rate of return of a portfolio has $7,500 invested in Stock X and $2,500 invested in Stock Y.

(vi)If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return?