Reference no: EM132070863
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 12.0% expected return, a beta coefficient of 1.1, and a 25.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
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 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.
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.
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?
Calculate the required return of a portfolio that has $7,500 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?
Stock prices-expectations and policy changes
: how the stock market is likely to react to each of the following scenarios:
|
How much is the current credit risk
: One month into the contract, is there any current credit risk? If yes, who bears it? How much is the current credit risk?
|
Maintenance costs and posing discomfort or harm to operators
: These issues negatively impacted operations by reducing productivity, increasing machinery malfunctions, increasing maintenance costs and posing discomfort
|
Discuss two ways constructivism is supported by e-learning
: Discuss at least two ways constructivism, as a learning theory, supports and is supported by the e-Learning process.
|
Calculate each stock required rate of return
: Calculate each stock's required rate of return. which of the two stocks would have the larger increase in its required return?
|
Key factors-enablers of supply chain management
: Explain the environmental triggers that forces companies to adopt supply chain management. What are the key factors/enablers of supply chain management?
|
What is the multifactor productivity ratio
: Workers cost $40 per hour including benefits and work 40 hours per week. The ship sells for $75 million. What is the multifactor productivity ratio? Show work
|
Compare and contrast two parenting styles
: Compare and contrast two parenting styles (i.e., uninvolved parenting, permissive parenting, authoritarian parenting, or authoritative parenting).
|
Is this current credit risk or potential credit risk
: Who bears the credit risk? Is this current credit risk or potential credit risk?
|