Consider the following information about Stocks I and II: Return of Rate if State Occurs State of
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Consider the following information about Stocks I and II:
Return of Rate if State Occurs | |||
State of Economy | Probability of State of Economy | Stock I | Stock II |
Recession | .30 | .08 | -.27 |
Normal | .45 | .19 | .14 |
Irrational Exuberance | .25 | .13 | .47 |
The market risk is 8 percent and the risk-free rate is 6 percent. (Do not round intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places., e.g., 32.16. Round your beta answers to 2 decimal places, e.g., 32.16)
The standard deviation on Stock I's return is __________ %, and the Stock I beta is _______. The standard deviation on Stock II's return is __________%, and the Stock II beta is _______. Therefore, based on the stock's systematic risk/beta, Stock _______ is “riskier”.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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