problem: Stock A has a 10 percent expected return, a beta coefficient of 0.9, & a 35% standard deviation of expected returns. Stock B has a 12.5 percent expected return, a beta coefficient of 1.2, & a 25% standard deviation. The risk-free rate is 6%, & the market risk premium is 5 percent.
[A] Compute each stock's coefficient of variation.
[B] Find which stock is riskier for a diversified investor?
[C] Compute each stock's required rate return.
[D] On the basis of the two stock's expected & required returns, determine which stock would be more attractive to a diversified investor?