Your research has determined the following information about the common stock of

Question

Your research has determined the following information about the common stock of two particular firms.

                                                              Stock A         Stock B

            Expected Return:                         10%               15%

            Standard Deviation                        5%                9%

            Part 1:

1.         Explain what is meant by the stock

Explanation / Answer

1>Expected Return=Riskfree Rate+Beta*Market Premium 2> CoefficientA:= 5/10 0.5 Coefficient B : = 9/15 0.6 4>B is riskier 5>Higher the co-efficient higher is the risk 6>Unsystematic risk 7>By investing in a number of stocks 8>In the time of investment.

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