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1 5 . Consider the following information on Stocks I and II: State of Economy Probability of State of Economy Rate of Return if State
Consider the following information on Stocks I and II:
State of Economy Probability of State of Economy Rate of Return if State Occurs
Stock I Stock II
Recession
Normal
Irrational exuberance
The market risk premium is percent, and the riskfree rate is percent.
a Calculate the beta and standard deviation of Stock I.
b Calculate the beta and standard deviation of Stock II
c Which stock has the most systematic risk?
d Which one has the most unsystematic risk?
e Which stock is riskier
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