1) Assume that standard deviation of returns on shares of share at 2 various companies is exactly similar. Does this mean that required rate of return will be similar for these two shares? How might required rate of return on share of third company be greater than required rates of return on shares of first 2 companies even if standard deviation of returns of third company’s share is lower?
Provide suitable ex of three companies with workings out of how third company has greater required rate of return even if standard deviation of returns of third company share is lower.