8-19 Evaluating risk and return

Stock X has a 10% expected return a beta coefficient of 0.9 and a 35% standard deviation of expected returns. Stock Y has 12.5% expected return, a beta coefficient of 1.2 and a 25% standard deviation. The risk-free rate is 6% and the market risk premium is 5%.

A) Calculate each stock's coefficient of variation?

B) Which stock is riskier for a diversified investor?

C) Calculate each stock's required rate of return.

D) On the basis of the two stock's expected and required returns, which stock would be more attractive to a diversified investor?

E) Calculate the require return of a portfolio that has 7,500 invested in stocks X and 2,500 invested in stock Y.

F) If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return?

Please complete in excel. Thanks