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5 Propiem 8.00 ICAR eBook Problem Walk-Through Stocks A and B have the following probability distributions of expected future returns: Probability 0.1 (15%) 0.1 A

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5 Propiem 8.00 ICAR eBook Problem Walk-Through Stocks A and B have the following probability distributions of expected future returns: Probability 0.1 (15%) 0.1 A B (24%) 0 3 0.5 14 18 0.2 18 29 0.1 32 41 a. Calculate the expected rate of return, TB, for Stock B (A = 12.60%.) Do not round intermediate calculations. Roun decimal places 16.50 mo V. IT STOCK more nighty correlated with the market than then it mignonave the same or SSC and nace be just a portfolio Sense 1 Assume the risk tree rate is 3,5%. What are the Sharpe ratios for Stoco A and B? Do not round intermediate calculations, Round your answers to four decimal places A- Stock A Stock B 6 Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part L in a stand-alone risk sense is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a righer beta than Stock A, and hence be more risky in a portfolio sense. II. In a stand-alone risk sense A is less risky than 8. If Stock B 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 portfolio sense It in a stand-alone risk sense A is less risky than 3. If Stock 3 is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. IV. In a stand-alone risk sense At less risky than 3. Ir stock is less highly correlated with the market than A, then it might have a higher beta than stock and hence be more risxy in a portfolio sense in a stand-alone risk sense Alis more risky than 18 Stock is less highly correlated with the market than A then it might have a lower botas than Stock A and hence be less risky in a portfolio sense 11 Tree

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