B Stocks A and B have the following probability distributions of expected future returns: Probability A 0.1 (10%) (26%) 0.1 2 0.5 16 0.2 24 0.1 37 a. Calculate the expected rate of return, to, for Stock B (A - 15.70%.) Do not round intermediate calculations. Round your answer to two decimal places. 0 18 27 44 b. Calculate the standard deviation of expected returns, or for Stock A (ob = 17.51%.) Do not round Intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock 8 as being less risky than Stock A? I. 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. II. I 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 portfollo sense. III. 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. IV. 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. V. 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. -Select- c. Assume the risk-free rate is 2.5%. What are the Sharpe ratios for Stocks 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 ? 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 lower beta than Stock A, and hence be less risky in a portfolio sense. 11. 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. III. In a stand-alone risk sense A is more risky than B. 19 Stock B is less highly correlated with the market than A, then it might have a lower beta thon Stock A, and hence be less risky in a portfolio sense. IV. In a stand-alone risk sense is more risky than 8. 11 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. V. In a stand-alone risk sense A is less risky than B. Ir 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. -Select
