Risk Analysis Lab

Formula: coefficient of variation = Risk or

Return

Use the following information and answer the following questions on Target and Starbucks.

	Standard Deviation	Beta	Expected return
Target	30%	1.2	10%
Starbucks	41%	0.6	10%

1. Explain which stock has more total risk and why?

2. Explain which stock has more unsystematic risk and why?

3. Explain which stock you would choose if you were going to hold only one stock. Why would you choose this stock?

4. Explain the term diversification and how could I use this concept with Target and Starbucks.

5. How does the concept of correlation impact the combining of these two stocks into a portfolio?

6. In our current economic situation, which stock do you expect to perform the best? Explain.