Stock X has a 9 5 expected return, a beta coefficient of 0 8, and a 35 standard deviation of expected returns Stock Y has a 12 5 expected return, a beta coefficient of 1 2, and a 30 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 CVx CVy 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 higher beta is less risky Stock Y has the higher beta so it is less risky than Stock X II 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 III 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 IV 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 V 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 Calculate each stock's required rate of return Round your answers to two decimal places rx ry 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 $3,500 invested in Stock X and $8,500 invested in Stock Y Do not round intermediate calculations Round your answer to two decimal places rp F If the market risk premium increased to 6 , which of the two stocks would have the larger increase in its required return

Question

Stock X has a 9 5  expected return, a beta coefficient of 0 8, and a 35  standard deviation of expected returns  Stock Y has a 12 5  expected return, a beta coefficient of 1 2, and a 30 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  CVx   CVy   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 higher beta is less risky  Stock Y has the higher beta so it is less risky than Stock X  II  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 III  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  IV  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  V  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  Calculate each stock's required rate of return  Round your answers to two decimal places  rx     ry     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 $3,500 invested in Stock X and $8,500 invested in Stock Y  Do not round intermediate calculations  Round your answer to two decimal places  rp     F  If the market risk premium increased to 6 , which of the two stocks would have the larger increase in its required return

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Stock X has a 9.5% expected return, a beta coefficient of 0.8, and a 35% standard deviation of expected returns. Stock Y has a 12.5%

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