Problem 13-26 Systematic versus Unsystematic Risk [LO3]

Consider the following information about Stocks I and II:

				Rate of Return If State Occurs
State of	Probability of
Economy	State of Economy			Stock I			Stock II
Recession		.25			.03			.32
Normal		.50			.23			.12
Irrational exuberance		.25			.07			.52

The market risk premium is 6 percent, and the risk-free rate is 2 percent. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16. Enter your return answers as a percent. )

The standard deviation on Stock I's return is percent, and the Stock I beta is . The standard deviation on Stock II's return is percent, and the Stock II beta is . Therefore, based on the stock's systematic risk/beta, Stock (Click to select) I II is "riskier".