Excel Online Structured Activity: Evaluating risk and return Stock X has 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected retums, Stock Y has a 12.5% expected return, a beta coeficient of 1.2, and a 20.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Calculatn each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations. 3.5 CV- 1.67 B. Which stock is riskler for a diversified investor? 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 Xi 11. 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 mornisky than Stock IV. For diversified investors the relevant risk is measured by standard deviation of expected returns. Therefore, the stock with the highet standard deviation of expected returns is more risky Stock X has the higher standard deviation so it is more risky than Stock Y. V. 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 Calculate bach stock's required rate of retum. Round your answers to two decimal places 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 X. IV. 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. V. 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. c. Calculate each stock's required rate of return. Round your answers to two decimal places. 10.5% 12 % d. On the basis of the two stocks expected and required returns, which stock would be more attractive to a diversified Investor? Stock Y 2. Calculate the required return of a portfolio that has $10,000 invested in stock X and $4,500 invested in stock Y. Do not round intermediate calculations. Round your answer to two decimal places 11.75 t. the market risk premium increased to 6%, which of the two stocks would have the larger Increase in its required return? Stock Y Check My Work Reset
