Question: Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(r A,s ) E(r

Intro

We know the following expected returns for stocks A and B, given different states of the economy:

State (s)	Probability	E(r_A,s)	E(r_B,s)
Recession	0.1	-0.03	0.05
Normal	0.5	0.12	0.08
Expansion	0.4	0.2	0.12

Intro We know the following expected returns for stocks A and B, given different states of the economy: State (s) Probability E(rA,s) E(rB,s) Recession 0.1 -0.03 0.05 Normal 0.5 0.12 0.08 Expansion 0.4 0.2 0.12 The

The expected return on the market portfolio is 0.06 and the risk-free rate is 0.02.

Part 1

What is the standard deviation of returns for stock A?

Part 2

What is the standard deviation of returns for stock B?

Part 3

What is the beta for stock A?

Part 4

What is the beta for stock B?

Part 5

Which stock has more total risk?

The stock with the lower beta

The stock with the lower standard deviation

The stock with the higher standard deviation

The stock with the higher beta

Part 6

Which stock has more systematic risk?

The stock with the higher standard deviation

The stock with the higher beta

The stock with the lower beta

The stock with the lower standard deviation

We know the following expected returns for stocks A and B, given different states of the economy: The expected return on the market portfolio is 0.06 and the risk-free rate is 0.02 . Part 1 Attempt 2/10 for 9.5 pts What is the standard deviation of returns for stock A ? Part 2 Attempt 1/10 for 10pt What is the standard deviation of returns for stock B ? What is the beta for stock A ? Part 4 What is the beta for stock B ? Which stock has more total risk? The stock with the lower beta The stock with the lower standard deviation The stock with the higher standard deviation The stock with the higher beta Part 6 Attempt 1/5 for 10 pts. Which stock has more systematic risk? The stock with the higher standard deviation The stock with the higher beta The stock with the lower beta The stock with the lower standard deviation

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