Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please be specific on what the answers are CVy= b. Which stock is riskier for a diversified investor? 1. For diversified investors the relevant risk

please be specific on what the answers are
image text in transcribed
CVy= b. Which stock is riskier for a diversified investor? 1. 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 riskier than Stock Y, II. For diversified investors the relevant risk is measured by standard deviation of expected returns. Therefore, the stock with the lower standard deviation of expected returns is riskier. Stock r has the lower standard deviation so it is riskier than St0ckX. III. For diversified investors the relevant risk is measured by beea. Therefore, the stock with the higher beta is less risky. Stock Y has the higher beta so it is less risky than Stock X. M. 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 S tock X. V. For diversified investors the relevant risk is measured by standard deviation of expected retums. Therefore, the stock with the higher standard deviation of expected returns is riskier, Stock X has the higher standard deviation so it is riskier than 5 tock Y. c. Calculote each stock's required rate of return. Round your answers to one decimal place. rx=ry=0b 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 recuired return of a portfolio that has $6,000 invested in 5 tock X and $2,000 invested in 5 tock . Do not round intermediate calculations. Round your answer to two decimal places. f1= % f. If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Restructuring And Innovation In Banking

Authors: Claudio Scardovi

1st Edition

331940203X, 978-3319402031

More Books

Students also viewed these Finance questions

Question

Describe the importance of employer branding.

Answered: 1 week ago

Question

Explain corporate sustainability.

Answered: 1 week ago