Stocks A and B have the following probability distributions of expected future returns Probability A B 0 1 (11 ) (27 ) 0 2 3 0 0 4 12 20 0 2 24 28 0 1 36 43 Calculate the expected rate of return, , for Stock B ( 12 70 ) Do not round intermediate calculations Round your answer to two decimal places Calculate the standard deviation of expected returns, A , for Stock A ( B 18 54 ) 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 Stock A If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense 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 risky in a portfolio sense If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense Assume the risk free rate is 1 5 What are the Sharpe ratios for Stocks A and B Do not round intermediate calculations Round your answers to four decimal places Stock A Stock B Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b 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 higher beta than Stock A, and hence be more risky in a portfolio sense In a stand alone risk sense A is less risky than B If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense In a stand alone risk sense A is less risky than B 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 risky in a portfolio sense In a stand alone risk sense A is less risky than B If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense 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 lower beta than Stock A, and hence be less risky in a portfolio sense Stocks A and B have the following probability distributions of expected future returns Probability B 0 1 (11 ) (27 ) 0 2 0 4 12 0 2 0 1 36 a Calculate the expected rate of return, 1B, for Stock B (1A 12 70 ) Do not round intermediate calculations Round your answer to two decimal places b Calculate the standard deviation of expected returns, GA, for Stock A (08 18 54 ) 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 Stock A I If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense II 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 risky in a portfolio sense III If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense IV If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense V If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense Select C Assume the risk free rate is 1 5 What are the Sharpe ratios for Stocks A and B Do not round intermediate calculations Round your answers to four decimal 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 higher beta than Stock A, and hence be more risky in a portfolio sense II In a stand alone risk sense A is less risky than B If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense III In a stand alone risk sense A is less risky than B 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 risky in a portfolio sense IV In a stand alone risk sense A is less risky than B If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense V 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 lower beta than Stock A, and hence be less risky in a portfolio sense Select

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Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (11 %) (27 %) 0.2 3 0 0.4

Stocks A and B have the following probability distributions of expected future returns:

Probability	A		B
0.1	(11	%)	(27	%)
0.2	3		0
0.4	12		20
0.2	24		28
0.1	36		43

Calculate the expected rate of return, , for Stock B ( = 12.70%.) Do not round intermediate calculations. Round your answer to two decimal places.
%
Calculate the standard deviation of expected returns, _A, for Stock A (_B = 18.54%.) 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 Stock A?
1. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
2. 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 risky in a portfolio sense.
3. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
4. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense.
5. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense.
Assume the risk-free rate is 1.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places.

Stock A:

Stock B:

Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b?
1. 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 higher beta than Stock A, and hence be more risky in a portfolio sense.
2. In a stand-alone risk sense A is less risky than B. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense.
3. In a stand-alone risk sense A is less risky than B. 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 risky in a portfolio sense.
4. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense.
5. 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 lower beta than Stock A, and hence be less risky in a portfolio sense.

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Stocks A and B have the following probability distributions of expected future returns: Probability B 0.1 (11%) (27%) 0.2 0.4 12 0.2 0.1 36 a. Calculate the expected rate of return, 1B, for Stock B (1A = 12.70%.) Do not round intermediate calculations. Round your answer to two decimal places. b. Calculate the standard deviation of expected returns, GA, for Stock A (08 = 18.54%.) 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 Stock A? I. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. II. 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 risky in a portfolio sense. III. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. IV. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense. V. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. -Select- C. Assume the risk-free rate is 1.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal 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 higher beta than Stock A, and hence be more risky in a portfolio sense. II. In a stand-alone risk sense A is less risky than B. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. III. In a stand-alone risk sense A is less risky than B. 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 risky in a portfolio sense. IV. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. V. 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 lower beta than Stock A, and hence be less risky in a portfolio sense. -Select