A and B have the following probablity distributions of expected future returns: a. Calculate the expected rate of return, rB, for Stock B ( rA=12.20%.) Do not round intermediate calculations. Round your answer to two dedmal places. b. Calculate the standard deviation of expected returns, a for stockA(b=17.66%.) Do not round intermediate calculations, found your answer to two decimal places \% Now calculate the coeffoient of veriation for stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard 5 tock 8 as being less risky then stock A? I. If Stock 8 is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense. in. If Stock B is more highly corroloted with the market than A, then it might have a lower beta than 5 tock A, and hence be less risky in a portfollo sense. III. II Stock B is more highly correiated with the market then A, then it might have the same beta as stock A, and hence be just as risky in a portfolio sense. TV. If Stock B is less highly correlated with the market than A, then it might have a lower beto than Stock A, and hence be less risky in a portfollo sense. V. If Stock B is iess highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfollo sense. Assume the risk-free rate is 3.5%. What are the Sharpe ratios for Stocks A and 8 ? Do not round intermediate calculations. Round your answers to four decimal places. Stock A: stock B: Are these calculations consistent with the information obtained from the coethcient of variation calculations in Part b? 1. In a stand-alone risk sense A is less risky than B. If Stock B is less highily correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. II. In a stand-alone risksense A is more risky than. B. If Stock B is less highly correlated with the market than A, then it might have a lower beta than 5 tock A, and hence be less risky in a portfollo sense. III. In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than 5 tock A and hence be more risky in a portfolio sense. TV. In a stand-alone risk sense A is less risky than B. If Stock B is more highly correlated with the market than A, then it might have the same beta as 5 tock A and hence be just as risky in a portfolio sense. V. In a stand-alone risk sense A is less risky than B, If Stock B is less highly correlated with the market than A, then it might have a fower beta than Stock A, and hence be less rishy in a partiolio sense
