Your research has determined the following information about the common stock of two parti
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%
1. Explain what is meant by the stock’s “Expected Return”
2. Calculate each stock’s coefficient of variation.
3. Under what situation is the coefficient of variation useful? Briefly explain.
4. Which stock is riskier?
5. What do you base your answer on?
6. What type of risk are we considering here?
7. Is there anything that can be done to reduce this type of risk? If so, what?
8. When is this type of risk most relevant?