Ch 08-RR (Homework - from EOC problmes) Search this course 0 X 0.1 Probability A 0.1 (8%) (24) 6 0 0.5 14 23 02 23 28 0.1 28 36 a. Calculate the expected rate of retum, . for Stock (PA - 14.20%.) Do not round intermediate calculations, Hound your answer to two decimal places b. Calculate the athdard deviation of expected returns, on for Stock A (or - 16544) Do not round intermediate calemon Hound your nuwe to two decimal place Now calculate the coefficient of variation for Stock 8. Do not found Intermediate calculations. Round your answer to two decimal place. Is it possible that most investors might regard stock as being less risky than Stock A? 1. I Stock is more highly correlated with the market than A, then it might have a higher beathan Stock A, and be less skin portfotosense I. I Stock is more highly correlated with the market than A, then it might have a lower beathan Stock A, and hence belossky in a portfolio m Stock B is more highly correlated with the market than A, then it might have the same but as Stock A, and hence be just as risky in a portfolio IV. I Stock 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 W I Stock is less highly correlated with the market than A, then it might have a higher beathan Stock A, and hence be more risk in a portfolio sense c. Assume the risk-free rate is 1.5%. What are the Sharpe ratios for Stocks A and B7 Do not round intermediate calculations. Round your answer to four decimal place Stock A Stock B Are these calculations consistent with the information obtained from the coefficient of variation ciculations in Part 7 In a stand-alone risk sense A is less risky than Bl I Stock B is more highly correlated with the market than A, then it might have the same beta s Stock A, a hence be just as risky in a portfolio sense II. In a stand-alone risk sense Adess risky than B. I Stock is less Nighly correlated with the market an A, then it might have a lower beta than Stack and hence be less risky in a portfolio sense TIL. 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 As more risky than B. I Stock B is less highly correlated with the market than then might have a lower beathan Stock And Now calculate the coefficient of variation for Stock B. Do not round Intermediate calculation. Howed your answer to two decimal places Is it possible that most investors might regard Stock B as being less risky than Stock Al 11 Stock is more highly correlated with the market than A, then it might have a higher beathan Stock A, and hence bebesky in a portfolio I Stock more highly correlated with the market than A, then it might have a lower beta thon Stock and hence be less risky in a portfolio sense I Stod is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as rinky in a portfolio 1. If Stop is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence below risky in a portfono seme V. Ir stock is less highly correlated with the market than A, then it might have a higher beta thon stock A, and henon bit mor risky in a portfolio varon. 1. c. Assume the risk-free rate is 1.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculation, Hound your answers to four decimal aces Stock A: Stock B Are these calculations consistent with the information obtained from the coefficient of variation calculations in Port ? I. In a stand-alone risk sense A is less risky than 3. If Stock B is more highly correlated with the market than then might have the same tinta as Stock A, and hence be just as risky in a portfolio sense. II. In a stand-alone risk sense A is less risky than B. If Stock Bis 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. 11. In a stand-alone risk sense A is less risky than B. If Stock B is less highly correlated with the market than then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. IV. In a stand-alone risk sense A is more risky than B. If Stock is less highly correlated with the market than A, then it might have a lower beta than Stock A, a hence be less risky in a partfolio 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 higher beathan Stock hence be more risky in a portfolio sense Grade it Now Save & Continue Continue without saving