beta so it is more risky than Stock $x.$

V$.$ For diversified investors the relevant risk is measured by standard deviation of expected returns. Therefore, the stock with the higher

standard deviation of expected returns is more risky. Stock $x$ has the higher standard deviation so it is more risky than Stock $Y.$

c$.$ Calculate each stock's required rate of return. Round your answers to two decimal places.

$r_x=,\%$

$r_y=,\%$

d$.$ On the basis of the two stocks' expected and required returns, which stock would be more attractive to a diversified investor?

e$.$ Calculate the required return of a portfolio that has $$6,000$ invested in Stock $x$ and $$7,000$ invested in Stock $Y.$ Do not round intermediate

calculations. Round your answer to two decimal places.

$r_p=,\%$

f$.$ If the market risk premium increased to $6\%,$ which of the two stocks would have the larger increase in its required return?