Consider the following information on Stocks I and II: State of Economy Probability of State of...

 

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Consider the following information on Stocks I and II: State of Economy Probability of State of Economy Recession Normal Irrational exuberance .21 .56 .23 Stock I Rate of Return if State Occurs Stock II .015 -.31 .325 .23 .185 .41 The market risk premium is 11.1 percent, and the risk-free rate is 4.1 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation c. Most systematic risk d. Most unsystematic risk "Riskier" stock % % Consider the following information on Stocks I and II: State of Economy Probability of State of Economy Recession Normal Irrational exuberance .21 .56 .23 Stock I Rate of Return if State Occurs Stock II .015 -.31 .325 .23 .185 .41 The market risk premium is 11.1 percent, and the risk-free rate is 4.1 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation c. Most systematic risk d. Most unsystematic risk "Riskier" stock % %

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Given Information Market Risk Premium 111 RiskFree Rate 41 Probability of State of Economy Recession ... View the full answer