Calculate each stocks coefficiet of variation

Assignment Help Financial Management

Reference no: EM13927705

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 coefficiet of variation.

(b) Which stock is riskier for a diversified investor?

(d) On the basis of the two stock's 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?

Reference no: EM13927705

Questions Cloud

Constructing a two stock portfolio based on the information : You are constructing a two stock portfolio based on the information provided below. What dollar amount will you invest in each stock to achieve the desired return goal? Stock X Stock Y Expected Return 14.0% 9.0% Goal Return of Portfolio: 10.00% Dolla..

Locate the two companies along the security market line : Find the betas of Kia Motors and 3M Corporation. Locate the two companies along the security market line (SML). Assume the risk free rate is 2%, and the market return 7%. Label carefully. Then write down the risk premiums of your companies and assess..

Price-earnings ratios-long-term debt from the balance sheet : Find and/or calculate the following items for Kia Motors and 3M Corporation: Price -Earnings (P/E) ratios. Long-term debt from the balance sheet. Long term Debt to Equity (D/E) ratios. P/E denotes price per share/most recent annual earnings per share..

What is the value of safeco stock when the required return : Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 7 percent. Safeco’s recent dividend was $1.10. What is the value of Safeco stock when the required return is 9 percent?

Calculate each stocks coefficiet of variation : 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..

Each company would be a good place to invest money : Make a list of 10 products or services that you buy on a weekly or monthly basis and the companies that sell them. Offer your initial views on whether each company would be a good place to invest money?

Compute arithmetic mean rate of return-standard deviation : The following are annual rates of return for U.S. government T-bills and U.K. common stocks. Year U.S Government T-Bills U.K Government Common Stock 2003 0.063 0.150 2004 0.081 0.043 2005 0.071 0.374 2006 0.090 0.192 2007 0.085 0.106. Compute the ari..

Describe briefly the a-b-c approach to inventory control : Describe briefly the A-B-C approach to inventory control.

What circumstances would the amount of safety stock held : What circumstances would the amount of safety stock held be

User Account

All Pages