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

a$.$ Calculate the expected rate of return ${?}_{}$ for Stock B $(=10\mathrm{.}60\%.)$ Do not round intermediate

calculations. Round your answer to two decimal places.

$\%$

b$.$ Calculate the standard deviation of expected returns, ${}_{a,}$ for Stock $A({}_a=17\mathrm{.}30\%.)$ 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 a lower

beta than Stock $A,$ and hence be less risky in a portfolio sense.

II$.$ 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. 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$.$ 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$.$ 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.

c$.$ Assume the risk$-$free rate is $2\mathrm{.}5\%.$ 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 sensel 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.