W08 Reading and Homework: Chapter 10 Questions Submission1.When considering stand-alone risk, the return distribution of a less risky investment is more peaked (“tighter”) than that of a riskier investment. What shape would the return distribution have for an investment with (a) completely certain returns and (b) completely uncertain returns?(a) Completely certain returns would make the return distribution tighter. (b) Completely uncertain returns makes the return distribution wider.
2.Stock Ahas an expected rate of return of 8%, a standard deviation of 20%, and a market beta of 0.5. Stock Bhas an expected rate of return 12%, a standard deviation of 15%, and a market beta of 1.5. Which investment is riskier? Why? (Hint: Remember that the risk of an investment depends on its context.)