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Problem Walk$-$Through

a$.$ Calculate each stock's coefficient of variation. Do not round intermediate calculations. Round your answers to two decimal places.

$C{V}_x=$

$C{V}_y=$

b$.$ Which stock is riskier for a diversified investor?

II$.$ For diversified investors the relevant risk is measured by beta. Therefore, the stock with the lower beta is riskier. Stock $x$ has the lower beta so it is riskler than Stock $Y.$

IV$.$ For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher beta is less risky. Stock $Y$ has the higher beta so it is less risky than Stock $x.$

V$.$ For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher beta is riskier. Stock $Y$ has the higher beta so it is riskier than Stock $x.$

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

$r_x=,\%$

$r_y=,\%$

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 $$9,000$ invested in Stockx and $$3,000$ 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?

$-$selec$-V$