Stock $x$ has a $9\mathrm{.}5\%$ expected return, a beta coefficient of $0\mathrm{.}8,$ and a $35\%$ standard deviation of expected returns. Stock $Y$ has a $12\mathrm{.}0\%$ expected return, a beta coefficient of $1\mathrm{.}1,$

and a $25\mathrm{.}0\%$ standard deviation. The risk$-$free rate is $6\%,$ and the market risk premium is $5\%.$

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

$C{V}_x=$

$C{V}_y=$

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

I. For diversified investors the relevant risk is measured by beta. Therefore, the stock with the lower beta is more risky. Stock $x$ has the lower beta so it is more

risky 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 more risky. Stock $Y$ has the lower standard deviation so it is more risky than Stock $x.$

III. 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 $x.$

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

risky than Stock X$.$

V$.$ For diversified investors the relevant risk is measured by standard deviation of expected returns. Therefore, the stock with the higher standard deviation of

expected returns is more risky. Stock X has the higher standard deviation so it is more risky than Stock Y $.$

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?

e$.$ Calculate the required return of a portfolio that has $$4,500$ invested in Stock $x$ and $$7,500$ 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?