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Module 5 Homework 5 A-Z ebook Problem Walk-Through Stocks A and B have the following probability distributions of expected future returns: Probability 0.1 (119) (24%) 0.1 6 0.6 16 0.1 21 30 0.1 40 a. Calculate the expected rate of retum, . for Stock B (A = 15.20%.) Do not round Intermediate calculations. Round your answer to two decimal place 22 47 b. Calculate the standard deviation of expected returna, ca, for Stock A ( - 17.799) Do not round intermediate calculations. Round your answer to two Now calculate the coefficient of variation for Stock 8. Do not round intermediate calculations, Round your answer to two decimal places Is it possible that most investors might regard Stock 5 as being less risky than Stock A 1. Stock is more highly correlated with the market than A, then it might have the same bata as Stock A, and hence he fost as risky in a portfolio IT. I Stock is less highly correlated with the market than then it might have a lower beathan Stock A, and hence be less sky in a pordolo sense . ir stock 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 IV. If Stock is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less skin portfolio sense V. 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 V. If Stock 3 is more highly correlated with the market than A, then it might have a lower beta thon Stock A, and hence be less risky in a portfolio sense. Select A-Z c. Assume the risk-free jate is 4.5%. 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? 1. In a stand-alone risk sense A is more risky than B. 1 Stock B is best 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 more risky than B. If Stock B is less highly correlated with the market than Athen it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. III. In a stand-alang nak sense A is less risky than B. 1 Stock 8 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. 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 lower beta than Stock A, and hence be less risky in a portfolio sense V. In a stand-alone risk sense A is tess risky than of Stock 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. Select Grade it Now Save & Continue Continue without saving