Problem $11-33$ Systematic versus Unsystematic Risk

$\backslash$table$[[\backslash$lim $\_\_($eBook $),$Consider the following information about Stocks I and II:$],[$State of Economy,$\backslash$table$[[$Probability of$],[$State of$],[$Economy$]],\backslash$table$[[$Rate of Return if State$],[$Occurs$]]],[$Stock I,Stock II$],[\mathrm{.}25,\mathrm{.}03,-\mathrm{.}32],[,$Normal,$\mathrm{.}50,\mathrm{.}23,\mathrm{.}12],[(3),$Irrational exuberance,$\mathrm{.}25,\mathrm{.}07,\mathrm{.}52]]$

The market risk premium is $6$ percent and the risk$-$free rate is $2$ percent. $($Do not round intermediate calculations. Enter the standard deviations as a percent and round all answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

$\backslash$table$[[$The standard deviation on Stock I$\text{'}$s expected return is$,,$percent, and the$],[$Stock I beta is$,,.$ The standard deviation on Stock II's expected return is$],[29\mathrm{.}72,$percent, and the Stock II beta is$,,.$ Therefore, based$],[$on the stock's svstematic risk$/$beta$.$ Stock,is "riskier".$]]$