Expected returns

Stocks X and Y have the following probability distributions of expected future returns:

Probability	X	Y
0.2	-12%	-23%
0.2	5	0
0.3	10	22
0.2	23	25
0.1	34	47

1. Calculate the expected rate of return, rY, for Stock Y (rX = 9.60%.) Round your answer to two decimal places. %

2. Calculate the standard deviation of expected returns, X, for Stock X (Y = 21.45%.) Round your answer to two decimal places. %

3. Now calculate the coefficient of variation for Stock Y. Round your answer to two decimal places.

4. Is it possible that most investors might regard Stock Y as being less risky than Stock X? CHOOSE ONE.

If Stock Y is more highly correlated with the market than X, then it might have the same beta as Stock X, and hence be just as risky in a portfolio sense.

If Stock Y is less highly correlated with the market than X, then it might have a lower beta than Stock X, and hence be less risky in a portfolio sense.

If Stock Y is less highly correlated with the market than X, then it might have a higher beta than Stock X, and hence be more risky in a portfolio sense.

If Stock Y is more highly correlated with the market than X, then it might have a higher beta than Stock X, and hence be less risky in a portfolio sense.

If Stock Y is more highly correlated with the market than X, then it might have a lower beta than Stock X, and hence be less risky in a portfolio sense.

ANSWER FULLY