Evaluating risk and return

Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 40% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of 1.1, and a 25.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%.

Each stock's coefficient of variation is:

CV_x = 4.00

CV_y = 2.08

C. Which stock is riskier for a diversified investor? Its's:

1. 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 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?

Stock Y

E. Calculate the required return of a portfolio that has $5,500 invested in Stock X and $3,000 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places.

r_p = _______%?

F. The market risk premium increased to 6%, Stock Y has the larger increase in its required return.

Please provide the answer and explanation for C and E.