Which stock would be more attractive to diversified investor

Assignment Help Financial Management

Reference no: EM131307790

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 stock's coefficient of variation d. On the basis of the two stocks expected and required returns, which stock would be more attractive to a diversified investor.

b. Which stock is riskier for a diversified investor e. Calculate the required return of a porfolio that has 7500 invested in stock X and 2500 in stock Y.

c. Calculate each stock's required rate of return f. If the market risk premium increased to 6%, which of the two stocks would have the larger increase in its required return.

Reference no: EM131307790

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