Question: Please use excel formulas to solve this. You are given this information on stock B & C State of economy Probability of state of economy

Please use excel formulas to solve this.

You are given this information on stock B & C

State of economy Probability of state of economy

Rate of return if state occurs

(stock B)

Rate of return if state occurs

(stock C)
Recession 25.00% 2.00% -20.00%
Normal 60.00% 32.00% 12.00%
Boom 15.00% 18.00% 40.00%

Market risk premium 7.00%

Risk-free rate 4.00%

Calculate the following for stocks B & C

Stock B Stock C
Expected return
Beta
Variance
Standard deviation

Answer the following questions

Which stock has the more total risk? Stock B or C?
Which stock has the more systematic risk? Stock B or C?
Which stock has higher risk premium? Stock B or C??

Explain your answers above what is meant by total risk, systematic risk, and risk premium?

Thank you.

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