Question

I really need help on these, please make sure to do the ones where I inputted answers because they are wrong. Thank you.

Stocks A and B have the following probability distributions of expected future returns: Probability A B (10%) (37%) 0.1 0.2 3 0 0.3 14 20 0.3 19 30 0.1 33 47 a. Calculate the expected rate of return, r, for Stock B (ra = 12.80%.) Do not round intermediate calculations. Round your answer to two decimal places. % b. Calculate the standard deviation of expected returns, OA, for Stock A (oB 22.18%.) Do not round intermediate calculations. Round your answer to two decimal % c. Now calculate the coefficient of variation for Stock B. Round your answer to two decimal places. d. Is it possible that most investors might regard Stock B as being less risky than Stock A? I. If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense II. If Stock B is more highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be less risky in a portfolio sense. III. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. IV. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. V. If Stock B is less highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. -Select- or down becoming more or les The SML line can change due to expected inflation and risk aversion. If inflation changes, then the SML platted on a graph will shift up or down parallel to the ald SML. If risk aversion changes, then the SML plotted an a graph will rotate f its assets and through changes in the amount of debt it uses. steep if investars become more or less risk averse, firm can influence market risk (hence its bcta coefficient) through changes in the compasition Ouantitative Problem: You are given the following information for Wine and Cork Enterprises (WCE) 4%: M- 100 % ; RPM 6%, and beta 1 RF required rate of return? Round vour answer to 2 decimal places, Do not round intermediate calculations What If inflation increases by 3 % but there is na change a not round intermediate calculations. investors risk aversign, what is WCE's required rate Freturn now? Round yaur answer to two decimal places. 9 % 26. What is wCE's required rate of return now? Round your answer o change in inflation, but risk aversion increases two decimal places. Do not round intermediate calculations. Assume now that there is 12 % creases by 3 % and risk aversion increases 2% , what is wCE's required rate of retun now? Round vour answen o two decimal places, Do not round intermediate calculations. If infla

Answer 1

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