Stock X has a 10 0 expected return, a beta coefficient of 0 9, and a 35 standard deviation of expected returns Stock Y has a 13 0 expected return, a beta coefficient of 1 3, and a 25 standard deviation The risk free rate is 6 , and the market risk premium is 5 Calculate each stock's coefficient of variation Do not round intermediate calculations Round your answers to two decimal places CV x CV y Which stock is riskier for a diversified investor For diversified investors the relevant risk is measured by beta Therefore, the stock with the lower beta is riskier Stock X has the lower beta so it is riskier than Stock Y For diversified investors the relevant risk is measured by standard deviation of expected returns Therefore, the stock with the lower standard deviation of expected returns is riskier Stock Y has the lower standard deviation so it is riskier than Stock X For diversified investors the relevant risk is measured by beta Therefore, the stock with the higher beta is less risky Stock Y has the higher beta so it is less risky than Stock X For diversified investors the relevant risk is measured by beta Therefore, the stock with the higher beta is riskier Stock Y has the higher beta so it is riskier than Stock X For diversified investors the relevant risk is measured by standard deviation of expected returns Therefore, the stock with the higher standard deviation of expected returns is riskier Stock X has the higher standard deviation so it is riskier than Stock Y Calculate each stock's required rate of return Round your answers to one decimal place r x r y On the basis of the two stocks' expected and required returns, which stock would be more attractive to a diversified investor Calculate the required return of a portfolio that has $3,000 invested in Stock X and $1,000 invested in Stock Y Do not round intermediate calculations Round your answer to two decimal places r p If the market risk premium increased to 6 , which of the two stocks would have the larger increase in its required return

The Answer is in the image, click to view ...

Question: Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 13.0%

Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 13.0% expected return, a beta coefficient of 1.3, and a 25% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%.

Calculate each stock's coefficient of variation. Do not round intermediate calculations. Round your answers to two decimal places.

CV_x =

CV_y =

Which stock is riskier for a diversified investor?

For diversified investors the relevant risk is measured by beta. Therefore, the stock with the lower beta is riskier. Stock X has the lower beta so it is riskier than Stock Y.
For diversified investors the relevant risk is measured by standard deviation of expected returns. Therefore, the stock with the lower standard deviation of expected returns is riskier. Stock Y has the lower standard deviation so it is riskier than Stock X.
For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher beta is less risky. Stock Y has the higher beta so it is less risky than Stock X.
For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher beta is riskier. Stock Y has the higher beta so it is riskier than Stock X.
For diversified investors the relevant risk is measured by standard deviation of expected returns. Therefore, the stock with the higher standard deviation of expected returns is riskier. Stock X has the higher standard deviation so it is riskier than Stock Y.

Calculate each stock's required rate of return. Round your answers to one decimal place.

r_x = __ %

r_y =___ %
On the basis of the two stocks' expected and required returns, which stock would be more attractive to a diversified investor?

Calculate the required return of a portfolio that has $3,000 invested in Stock X and $1,000 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places.
r_p = ___ %
If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 20.0% standard...

EVALUATING RISK AND RETURN Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 12.0% expected return, a beta coefficient of...

e and f please Problem Walk-Through EVALUATING RISK AND RETURN Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected retums. Stock Y has a 120%...

Excel Online Structured Activity: Evaluating risk and return Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 12.5%...

11 Video Excel Online Structured Activity: Evaluating risk and return Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a...

Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 30% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 20.0% standard...

EVALUATING RISK AND RETURN Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 40% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of...

Stock X has a 10.0% expected return, a beta coefficient of 0.9 , and a 40% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2 , and a 20.0%...

Q6 Stock X has a 10.0% expected return, a beta ocent of 0.9, and a 35% standard deviation of expected retums. Stock Ya 12.5% expected return, a beta cocent of 1.2, and a 25% standard deviation. The...

The following unrelated events are typical of those experienced by business entities. 1. Acquire cash by issuing common stock. 2. Purchase land with cash. 3. Purchase equipment with cash. 4. Pay...

Who produces capital, wages and profits from a political economy perspective and how does the control of the surplus ( capital flight and strike, campaign contributions, media and philanthropy)...

The process of filing information with the SEC concerning of a post sale of securities to the public is called a blank

2- Let x and y be two words (both different than the empty string) and xy is their concatenation. Show that if x, y and xy are all in PALINDROME, then there is a word z such that x= z n and y=z m for...