Question 2 \

based on the following information in the table below:

State of economy	Probability of of economy	Rate of return if state occurs
		Stock A	STOCK B
Recession	0.15	0.09	- 0.30
Normal	0.70	0.42	0.12
Boom	0.15	0.26	0.44

The market risk premium is 10 per cent, and the risk-free rate is 4 per cent.

1. Compute the beta (A) and standard deviation of stock A.
2. Compute the beta (B) and standard deviation of stock B.
3. Which security is riskier? Explain