Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 13.0% expected return, a beta coefficient of 1.3, and a 20.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations. CVx

Question

Business

Angela Jarvis

4 September, 01:59

Stock X has a 10.0% expected return, a beta coefficient of 0.9, and a 35% standard deviation of expected returns. Stock Y has a 13.0% expected return, a beta coefficient of 1.3, and a 20.0% standard deviation. The risk-free rate is 6%, and the market risk premium is 5%. Calculate each stock's coefficient of variation. Round your answers to two decimal places. Do not round intermediate calculations. CVx

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Answers (1)

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Jude Lamb · Answer 1

Coefficient of Variation for X = 3.5

Coefficient of Variation for Y = 1.54

Explanation:

The computation of coefficient of variation is shown below:-

Coefficient of Variation for X = Standard Deviation : Expected Return

= 0.35 : 0.10

= 3.5

Coefficient of Variation for Y = Standard Deviation : Expected Return

= 0.20 : 0.13

= 1.54

Therefore for computing the coefficient of variation we simply applied the above formula.