Calculate the coefficient of variation of each stock

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Question - Stock X has a 9% expected return, a beta coefficient of 0.8 and a 30% standard deviation of expected returns. Stock Y has a 14% expected return, a beta coefficient of 1.3 and a 20% standard deviation. The risk-free rate is 5% and the market risk premium is 6.5%.

1. Calculate the coefficient of variation of each stock.

1.1 Which stock is riskier than the other stock?

1.2 What is the required rate of return of each stock?

1.3 Calculate the required return of a portfolio that has RM8,000 invested in Stock X and RM2,000 invested in Stock Y.

1.4 If the market risk premium increased to 7%, which of the two stock would have the larger increase in its required return?

Reference no: EM133042988

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