Question: Please include explanation. Stock A has a 10% expected return, beta of 0.9, and a 35% standard deviation of expected returns. Stock B has a

Please include explanation.

  1. Stock A has a 10% expected return, beta of 0.9, and a 35% standard deviation of expected returns. Stock B has a 12.5% expected return, a beta of 1.2, and a standard deviation of 25%. The risk-free rate is 6%, and the market risk premium is 5%.
    1. Calculate each stocks coefficient of variation.
    2. Is A or B riskier for a diversified portfolio?
    3. Calculate A and Bs required rate of return?
    4. Based on A and Bs expected and required rate of return, which stock would be more attractive to a diversified portfolio?
    5. What would the portfolio beta be if $7,500 was invested in Stock A and $2,500 was invested in Stock B? (And then the Required Rate of Return for the portfolio?)

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