🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Finance
1
answer
0
watching
215
views
10 Jun 2019

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 1.2, and a 25.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. Round your answers to two decimal places.

a. CVx = CVy =

b. Calculate each stock's required rate of return. Round your answers to two decimal places.
rx = %
ry = %

c. Calculate the required return of a portfolio that has $4,500 invested in Stock X and $2,500 invested in Stock Y. Round your answer to two decimal places.
rp = %

Watch
1
answer
0
watching
215
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Hubert Koch
Hubert KochLv2
13 Jun 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

Stock X has a 9.5% expected return, a beta coefficient of 0.8, 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 deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations.CVx =?CVy=?Calculate each stock's required rate of return. Round your answers to two decimal places rx=10% ry=? Calculate the required return of a portfolio that has $6,000 invested in Stock X and $2,000 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places. rp =?

Evaluating risk and return

Stock X has a 9.5% expected return, a beta coefficient of 0.8, and a 40% standard deviation of expected returns. Stock Y has a 12.5% expected return, a beta coefficient of 1.2, and a 25.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%.

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

Which stock is riskier for a diversified investor?

For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher beta is more risky. Stock Y has the higher beta so it is more risky 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 more risky. Stock X has the higher standard deviation so it is more risky than Stock Y.

For diversified investors the relevant risk is measured by beta. Therefore, the stock with the lower beta is more risky. Stock X has the lower beta so it is more risky 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 more risky. Stock Y has the lower standard deviation so it is more risky 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.


-Select-IIIIIIIVVItem 3

Calculate each stock's required rate of return. Round your answers to two decimal places.
rx = %
ry = %

On the basis of the two stocks' expected and required returns, which stock would be more attractive to a diversified investor?
-Select-Stock XStock YItem 6

Calculate the required return of a portfolio that has $4,500 invested in Stock X and $9,000 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places.
rp = %

If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return?
-Select-Stock XStock Y

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 1.1, and a 30.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%.

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

Which stock is riskier for a diversified investor?

For diversified investors the relevant risk is measured by beta. Therefore, the stock with the higher beta is more risky. Stock Y has the higher beta so it is more risky 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 more risky. Stock X has the higher standard deviation so it is more risky than Stock Y.

For diversified investors the relevant risk is measured by beta. Therefore, the stock with the lower beta is more risky. Stock X has the lower beta so it is more risky 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 more risky. Stock Y has the lower standard deviation so it is more risky 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.


-Select-IIIIIIIVVItem 3

Calculate each stock's required rate of return. Round your answers to two decimal places.
rx = %
ry = %

On the basis of the two stocks' expected and required returns, which stock would be more attractive to a diversified investor?
-Select-Stock XStock YItem 6

Calculate the required return of a portfolio that has $10,000 invested in Stock X and $5,000 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places.
rp = %

If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return?
-Select-Stock X or Stock Y?

Related Documents

FIN 2000 Lecture Notes - Lecture 8: Capital Asset Pricing Model, Risk-Free Interest Rate, Risk Premium
yellowcattle191
FIN 301
Final Exam
Study Guide
FIN 301 Study Guide - Quiz Guide: S&P 500 Index, Standard Deviation, Capital Asset Pricing Model
turquoisegnu128
FIN 2650 Lecture Notes - Lecture 16: Equity Premium Puzzle, Systematic Risk, Capital Asset Pricing Model
harlequinmole452

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in