(1) Explain some of the key differences between standard deviation and beta. (2 marks)

(2) Consider the following information about Stocks A and B:

State of Economy	Probability of State of Economy	Stock A	Stock B
Boom	0.25	0.06	0.44
Normal	0.50	0.21	0.09
Recession	0.25	0.02	-0.25

The market risk premium is 8 percent, and the risk-free rate is 4 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is riskier? Fully explain the rationale behind your argument. (8 marks)