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29 January, 08:34

Stock A has a required return of 19%. Stock B has a required return of 11%. Assume a risk-free rate of 4.75%. Which of the following is a correct statement about the two stocks. Stock A is riskier. Stock B is riskier. The stocks have the same risk. We would need to know if the markets are efficient to answer this question.

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  1. 29 January, 08:38
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    Stock A is riskier.

    Explanation:

    Answer : Stock A is riskier because Risk premium of Stock A i. e. 19% - 4.75% = 14.25% is greator than Risk premium of Stock B i. e. 11% - 4.75% = 6.25%.
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