Problem 8.06 (Expected Returns) Question Check My Work (1 remai ebook Problem Walk-Through Stods A and B have the following probability distributions of expected future returns Probability (24%) Calculate the expected rate of return, s. for Stock PA 14.60%.) Do not found itemidiate calculations. Round your answer to two decinal places b. Calculate the standard deviation of pected returns, on for Stock A ( -18.21) Do not found intermediate calculations. Round your answer to two deomal places Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations, Round your answer to two decimal places Is possible that most investors might regard Stock B as being less risky cher Stock ? 1. If Stock is less highly correlated with the market than then it might have a higher beta than Stock A, and hence here in a portfolio sense IT. IF Stock is more highly correlated with the market than the might have a her beatha Stock A nd hence beless skin portfoloses III. If Stock is more holy created with the market to the might have a lower betean Stock And hence be senisky na portfolic sense IV. If Stock is more highly correlated with the market than A, then it might have the same but as Stock A, and hence be just as nisky in a portfolio sense. V. If Stock 3 is less highly correlated with the market than A, then it might have a lower bets than Stock A, and hen c e ework Problems a. Calculate the expected rate of return, Ps, for Stock P = 14.60%.) Do not round intermediate calculations. Round your answer to two decimal places b. Calculate the standard deviation of expected returns, A, for Stock A (on = 18.215.) Do not round intermediate calculations. Round your answer to two decimal places Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? 1. 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 sky in a portfolio sense IL. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A and hence be less risky in a portfolio sense. III. 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 IV. If Stock B is more highly correlated with the market than then it might have the same beta as Stock A, and hence be just as risky in portfolio sense. V. 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 Assume the risk-free rate is 1.5%. What are the Sharpe ratios for Stocks A and B2 Do not round intermediate calculations. Round your answers to four decal places Stock Are these calculations consistent with the information obtained from the coefficient of variation calculations in Part b? 1. na standalone risk sense is more risky than 0. stock is less highly correlated with the market than then it might have a lower beta than stock A. and hence belous tinky in portfolio sense. 11. In a stand-alone risk sense A is more risky than i. If 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 portfolio sense.. 111 in a standalone ruk sense A is less risky than B. If Stock is more highly correlated with the market than A, then it might have the same bets as Stock A, and hence be just as risky in a portfolio sense IV. in stand-alone risk sense is less risky than a ir stock it is less highly correlated with the market than A, then it might have a lower beta than stock A, and hence V. In a standalone risk vense is less risky than I Stock is highly correlated with the market than Athenichthave her beatha ch and