a. Calculate the expected rate of return, rB, for Stock B(rA=12.10%.) Do not round intermediate calculations. Round your answer to two decimai places. b. Calculate the standard deviation of expected returns, on, for Stock A ( e=16.70%.) Do not round intermediate calculations. Round your answer to two decmal places % Now calculate the coefficient of variation for 5 tock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard 5 tock B as being less risky than Stock A? 1. 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. I1. If Stock B 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. IIt. If Stock B is less highly correlated with the rikarket than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. IV. If Stock B 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. V. If Stock B is more 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. c. Assume the risk-free rate is 3.5%. What are the 5harpe ratios for 5 tocks A and B ? 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 coefficient of variation calculations in Part b? 1. 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 higher beta than Stock A, and hence be more risky in a portfolio sense. II. 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 lower beta than Stock A, and hence be less risky in a portfolio 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 tack 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 Stock 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 lower beta than Stock A, and hence be less risky in a portfolio sense
