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10.2 Stock A has an expected rate of return of 8 percent, a standard devia- tion of 20 percent, and a market beta of 0.5. Stock B has an expected rate of return of 12 percent, a standard deviation of 15 percent, and a market beta of 1.5. Which investment is riskier? Why? (Hint: Remem- ber that the risk of an investment depends on its context.)

10.2 Stock A has an expected rate of return of 8 percent, a standard devia- tion of 20 percent, and a market beta of 0.5. Stock B has an expected rate of return of 12 percent, a standard deviation of 15 percent, and a market beta of 1.5. Which investment is riskier? Why? (Hint: Remem- ber that the risk of an investment depends on its context.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Chapter 10: Financial Risk and Required Return 363 10.2 Stock A has an expected rate of return of 8 percent, a standard devia- tion of 20 percent, and a market beta of 0.5. Stock B has an expected rate of return of 12 percent, a standard deviation of 15 percent, and a market beta of 1.5. Which investment is riskier? Why? (Hint: Remem- ber that the risk of an investment depends on its context.)
Transcribed Image Text:Chapter 10: Financial Risk and Required Return 363 10.2 Stock A has an expected rate of return of 8 percent, a standard devia- tion of 20 percent, and a market beta of 0.5. Stock B has an expected rate of return of 12 percent, a standard deviation of 15 percent, and a market beta of 1.5. Which investment is riskier? Why? (Hint: Remem- ber that the risk of an investment depends on its context.)
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