5. Assume that the expected inflation rate has just been revised upward by the market. Would the required return by investors who invest in stocks be affected? Explain

9. How do earnings surprises affect valuations of stock?

P1. Assume the following information over a five-year period: Average risk-free rate 6% Average return for Crane stock 11% Average return for Load stock 14% Standard deviation of Crane stock returns 2% Standard deviation of Load stock returns 4% Beta of Crane stock 0.8 Beta of Load stock 1.1 Determine which stock has higher risk-adjusted returns according to the Sharpe index. Which stock has higher risk-adjusted returns according to the Treynor index? Show your work