EVALUATING RISK AND RETURN Stock X has a 10.5% expected return,a beta coefficient of 1.0, and a 30% standard deviation of expectedreturns. Stock Y has a 12.5% expected return, a beta coefficient of1.2, and a 30.0% standard deviation. The risk-free rate is 6%, andthe market risk premium is 5%. Calculate each stock's coefficientof variation. Round your answers to two decimal places. Do notround intermediate calculations. CVx = CVy = Which stock is riskierfor a diversified investor? For diversified investors the relevantrisk is measured by beta. Therefore, the stock with the higher betais more risky. Stock Y has the higher beta so it is more risky thanStock X. For diversified investors the relevant risk is measured bystandard deviation of expected returns. Therefore, the stock withthe higher standard deviation of expected returns is more risky.Stock X has the higher standard deviation so it is more risky thanStock Y. For diversified investors the relevant risk is measured bybeta. Therefore, the stock with the lower beta is more risky. StockX has the lower beta so it is more risky than Stock Y. Fordiversified investors the relevant risk is measured by standarddeviation of expected returns. Therefore, the stock with the lowerstandard deviation of expected returns is more risky. Stock Y hasthe lower standard deviation so it is more risky than Stock X. Fordiversified investors the relevant risk is measured by beta.Therefore, the stock with the higher beta is less risky. Stock Yhas the higher beta so it is less risky than Stock X. Calculateeach stock's required rate of return. Round your answers to twodecimal places. rx = % ry = % On the basis of the two stocks'expected and required returns, which stock would be more attractiveto a diversified investor?

Calculate the required return of a portfolio that has $4,000invested in Stock X and $8,000 invested in Stock Y. Do not roundintermediate calculations. Round your answer to two decimalplaces.

rp = % If the market risk premium increased to 6%, which of thetwo stocks would have the larger increase in its requiredreturn?