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Business, 14.06.2021 16:00 hayleneolide

Stock X has a 10% 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 25% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. a. Calculate each stockâs coefficient of variation.
b. Which stock is riskier for a diversified investor?
c. Calculate each stockâs required rate of return.
d. On the basis of the two stocksâ expected and required returns, which stock would be more attractive to a diversified investor?
e. Calculate the required return of a portfolio that has $7,500 invested in Stock X and $2,500 invested in Stock Y. f. If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return?

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