Stocks A and B have the following probabify distributions of expected future returns: a. calculate the expected rate of return, rB, for Stock B(AA=15.40%.) Do not round intermediate calculations. Round your answer to two decimal pisces, b. Calculate the standard deviation of expected feturns, Ow, for Stock A (Cbb=17.39%. ) Do not round intermedate calculations. Round your answer to twa decimal places. no Now calcilate the coefficient of variation for 5t0ck. Do not round intermediate calculations. Aound your answer to two decimal pisces: Is it possible that most investors might regard Stock B as being less risky than Stock A? 1. If stock 8 is more highly correlated with the market than A, then is might have a higher beta than 5 tock A and hence be less risky in a portfolia sense: It. If 5 tock B is more highly cocrelated with the market than A, then it might have a lower beta than Stock, and hence be less risky in a portfolio sense. IfI. If Stock 8 is more highly correiated with the market than A, then it might have the same beta as 5 tock A, and hence be just as risky in a portolio sense N. If Stock B is less highly correisted with the market than A, then it might have a lower beta than stock A, and hence be less risky in a portfolio sense. V. if Stock 6 is less highly carrelated with the market than A, then it might hove a higher beta than 5 tock A, and bence be more risky in a sortfolio sense. c. Assume the risk-fee rete is 2.5%. What are the sharpe ratios for Stocks A and Bt Do not round intermediate calculations. Alound your answers to four cecinat glaces. b. Calculate the standard deviation of expected refurns, a, for Stock A ( s=17.39%. ) Do not round intermediate calculations. Round your answer to two decimal places, Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than 5 tock A ? 1. If Stock 8 is more highly correlated with the market than A, then it might have a higher beto than Stock A, and hence be less risky in a portfolio sense. "It. If Stock B is more highy correlated with the market than A, then it might have a lower beta than 5 tock A, and hence be less risky in g portfolo sense. III. If Stock 8 is more highly correiated with the market than A, then it might have the same beta as 5 tock A and hence be just as risky in a portfolo sense. IV. If Stock B is less highly correlated with the market than A, then it might have a lower beta than stock A, and hence be less risicy in a portfollo sense. V. If Stock B is less highly correlated wath the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfollo sense. C. Assume the risk-free rate is 2.5%. What are the 5harpe ratios for Stocks A and B? bo not round intermedate calculations. Round your answers to four secimal places. Stock A: Stock B: Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b? I. In a stand-alone risk sense A is more risky than B. If Stock B is less highly correlated with the market than A, then it might have a figher beta than 5 tock A, and hence be more risky in a portfolio sense. It. In a stand-alone risk semb A is less rikcy then B, ff stock B is more highly correlsted wath the market than A then it might have the same beta os Stock A, and hence be just at risky in a pertfolio sense. IH: In a stand-alone risk sense A is less risky than B. If Stock B is lest highly correlated wat the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. TV. In a standiplone risk sense A is lews risky than B, If Stock B is less highly correlated with the market than A, then it might have a higher beta than 5 tock A and hence be more risky in a portfols sense. V. In a stand-alane riak sense A is more risky than B. If stock 8 is less highly correlated with the market than A, then it might have a lower beta than 5 tock A. and hence be lews risky in o portfolie sense
