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Stocks A and B have the following probability distributions of expected future returns: Probability 0.1 0,2 0.5 0.1 0.1 a. Calculate round Inter Fate of return, ulations. Round your answer to two decimal places. -Select- A (8%) 6 14 20 34 B (36%) 0 21 27 42 b. Calculate the standard deviation of expected returns, OA, for Stock A (OB = 20.22%.) Do not round intermediate calculations. Round your answer to two decimal place % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Stock A: , for Stock B ( Stock B: Is it possible that most investors might regard Stock B as being less risky than Stock A? I. 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. II. 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. III. 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. IV. 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. V. 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. = 12.80%.) Do not c. Assume the risk-free rate is 3.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places. Are there calculations consistent with the information obtained from the coefficient of variation calculations in Part b2

Stocks \\( A \\) and 8 have the folowing probabity distrbutions of expected future retums: a. Caloulat round inti. sof return, Sonk. Round vour afiswe to two desimal places for steck B \=12.10 Now calculate the coefficent of vanetion for stock B. Do not round intermed ate calculations. Pound your answer to two decimal places Is it possibie that mast investors might regerd Stock o as beng less risky than stock A? I. If Stock 8 is more highiy correlated with the market than \\( A \\) then it might have a higher beta than stock A, and hence be less ricky in a portfolio sensel. 11. If Stock \\( B \\) is more highly correlated with the market than A, then it inight have a lower beta than stock \\( A \\), and hence be less rishy in a portelio sense. III. If 5 tock B is more highly correlated with the market than \\( A \\) then \\( f \\) might have the same beco as stock \\( A \\), and hence be just as risky in a portfolio sense. IV. Ir Stock B is less highly correlated with the market than A, then it might have a lonet beta than stock A, and hence be less roky in a portfolo sense. V. If stock a is less highly correlated weh the marke thas A, then it might have a higher beta than Stock A, and hence be more eisky in a portolio serte. Stock A Stock 8 nd-of-Chapter Problems - Risk and Rates of Return D. Caiculate the standard devation of expected returns, \\( \\sigma_{N} \\) for Stock \Aleft(sigma0=20.22.) Do not round intermedate caiculations. Round your answer to two decimar piaces. Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decmal places. Is it possible that most investors might regord Stock B as being less risky than Stock A? L. It Stock \\( B \\) is more highily correlated with the market than \\( A \\), then it might have a higher beto than stock \\( A \\), and hence be less risky in a portfollo serse. It. If Stock B is more highly correiated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfollo sense. 111. If Stock B is more highly correlated with the market than \\( A \\), then it might have the same beta as stock \\( A \\), and bence be just as \\( r \\) sky in a portfolio sense. IV. 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. v. If Stock \\( B \\) is less highly correlated with the market than A, then if might have o higher beta than Stock \\( A \\), and hence be more risky in a portfolio sense. C. Assume the ribafree rate is \3.5. What are the Sharpe ratios for 5 tocks \\( \\mathrm{A} \\) and \\( \\mathrm{B} \\). Do not round intermedate calculations. Round vour answers to four decimal places. stock A: stock B Are these caiculations consistent inth the information obtainel from the coefficient of variation calculations in Part b? 1. In a stand-slone risk sense \\( A \\) is more risky than B. If stock B is less highly correlated with the market than A, then it might hive a lower beta than scock \\( A \\) and pence be lest risky in portiolo sense. 11. In a stand alone risk sense A is mare rishy than B. If Stock \\( B \\) is less nighiv cocrelated with the market than A, then it might have a higher Deta than stock A, and hence be more risky in a portilio sense. III. In a stond-oloce risk sense A in less risky than B. If Stock B is more Nighly correlated with the market than A. then it moht have the same beta as Stock A, and hence be just as risky in a portfobo seme. IV. in a stand - ione nak sense A is less nsky than a. If Stock B is less nighiy correlated with the merket tran A, then it might have a lower beta than Stock A, and hence be lews risky in a portolio sense. \\( \\checkmark \\) in a sand-alone risk vense \\( A \\) is leas risky than B. If Stock 8 is less highir carrelated with the market than \\( A \\), then it might have a higher beta than stock A, and hence be more risky in a portfolie sence

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