Explain which action is most risky for diversified investor

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Silver Industries" "Y" shares have an expected return of 15%, a beta coefficient of 0.8, and a standard deviation of expected yields of 31%. The company's Z shares have an expected return of 11.3%, a beta coefficient of 1.5 and a standard deviation of 25%. The risk-free rate is 5% and the market risk premium is 4%.

Problem 1: Explain which action is most risky for diversified investors.

Problem 2: Calculates the expected rate of return for both actions.

Problem 3: Explain which of the shares might be most attractive to investors.

Problem 4: Calculates the return of a portfolio that has $9,200 invested in the "Y" stock and $3,500 invested in the "Z" stock.

Problem 5: Suppose the market risk premium increases to 7%, which of the shares would have a higher return?

Reference no: EM132837002

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