Stock Zebra has a standard deviation of 5.7 and a beta of 1.6, while Stock Panda...
Stock Zebra has a standard deviation of 5.7 and a beta of 1.6, while Stock Panda has a standard deviation of 6.2 and a beta of 1.3. Which stock will have the highest expected return? and why?
Homework Answers
Answer: Stock Zebra should have highest expected return.
Expected return=Risk free rate +Beta*(Market return-Risk free
rate)
Considering the risk free rate and market return to be same for
both the companies.
The company with higher beta will have higher expected
return.
In the given question, Stock Zebra has the higher beta.
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