Question: Systematic versus Unsystematic Risk Consider the following information about Stocks I and II: The market risk premium is 8 percent, and the risk-free rate is

Systematic versus Unsystematic Risk Consider the following information about Stocks I and II:

The market risk premium is 8 percent, and the risk-free rate is 4 percent. Which stock has the most systen1aic risk? Which one has the most unsystematic risk? Which stock is ??riskier??? Explain.

State Of Economy Probability of State Rate of Return if State Occurs

State Of Economy Probability of State Rate of Return if State Occurs of Economy Stock B Stock A Recession 25 .09 -30 50 42 .12 Normal Irational exuberance 25 26 44

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