Question

In: Finance

Stock X has a 9.5% expected return, a beta coefficient of 0.8, and a 40% standard...

Stock X has a 9.5% expected return, a beta coefficient of 0.8, and a 40% standard deviation of expected returns. Stock Y has a 13.0% expected return, a beta coefficient of 1.3, and a 30.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%.

  1. Calculate each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations.

    CVx =

    CVy =

  2. Calculate each stock's required rate of return. Round your answers to two decimal places.

    rx =  %

    ry =  %

  3. Calculate the required return of a portfolio that has $2,000 invested in Stock X and $5,000 invested in Stock Y. Do not round intermediate calculations. Round your answer to two decimal places.

    rp =  %

Solutions

Expert Solution

RETURN ON PORTFOLIO CAN BE CALCULATED USING 2 METHODS. I HAVE EXPLAINED BOTH OF THEM


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