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A stock had a 12% return last year, a year when the overall stock market declined. Does this mean that the stock has a negative beat and thus very little risk if held in a portfolio? Explain. If investor's aversion to risk increases, would the risk premium on a high-beta stock increase by more or less than that on a low-beta stock? Explain. If a company's beta were to double, would its required return also double? In Chapter 7 we saw that if the market interest rate, r_d, for a given bond increased, the price of the bond would decline. Applying this same logic to stocks, explain how a decrease m risk aversion would affect stocks' prices and earned rates of return, how this would affect risk premiums as measured by the historical difference between returns on stocks and returns on bonds, and (c) what the implications of this would be for the use of historical risk premiums when applying the SML equation. A stock's returns have the following distribution: Calculate the stock's expected return, standard deviation, and coefficient of variation. PORTFOLIO BETA An individual has $35,000 invested in a stock with a beta of 0.8 and another $40,000 invested in a stock with a beta of 1.4. If these are the only two investments in her portfolio, what is her portfolio's beta

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