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show the formula a. EVALUATING RISK AND RETURN Stock X has a 10% expected return, a beta coefficient of 0.9, and a 35% standard deviation
show the formula
a. EVALUATING RISK AND RETURN Stock X has a 10% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 25% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. b. Which stock is riskier for a diversified investor? C. Calculate each stock's required rate of return. 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 $7,500 invested in Stock X and $2,500 invested in Stock Y. f. If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return? the follouring historical returnsStep by Step Solution
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