Ch 08: End-of-Chapter Problems - Risk and Rates of Return Stock X has a 9.5% expected return, abeta coefficient of O., and 35% Mandard deviation of expected retums. Stock Y has 12.5 expected return, a beta coefficient of 1.2, and a 20% standard deviation. The risk-free rate is 6%, and the market risk premium is 5 a Calculate each stock's confident of variation. Do not round Intermediate calculations. Round your answers to two decimal places CV, CV- b. Which stock is riskler for a diversified Investor? 1. For diversified investors the relevant risk is measured by beta. Therefore, the stock with the lower betais risker Stock X has the lower beta so tis riskier than Stock Y. II. 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 niskier Stock Y has the lower standard deviation so it is riskler than Stock X III. 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. IV. For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher betais risider. Stock Y has the higher beta so it is riskier than Stock X V. 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 riskier. Stock X has the Nigher standard deviation so it is risider than Stock Y C. Calculate each stock's required rate of return. Round your answers to one decimal place Ty d. On the basis of the two stocks expected and required returns, which stock would be more attractive to a diversified investor? e. Calculate the required return of a portfolio that has $7.500 invested in Stock X and $2.500 invested in Stock . Do not round Intermediate calculations. Round your answer to two decimal places. t. If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return