Question: (1) Explain some of the key differences between standard deviation and beta. (2) marks) (2) Consider the following information about Stocks A and B: State
(1) Explain some of the key differences between standard deviation and beta. (2) marks) (2) Consider the following information about Stocks A and B: State of Economy Boom Normal Recession Probability of State of Economy 0.25 0.50 0.25 Stock A 0.06 0.21 0.02 Stock B 0.44 0.09 -0.25 The market risk premium is 8 percent, and the risk-free rate is 4 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is "riskler"? Fully explain the rationale behind your argument. (8 marks
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