Question
(1) You must show your work to be given credit. Do not use hard values in your calculations. You are provided the following information on
(1)
| You must show your work to be given credit. Do not use hard values in your calculations. | ||||
| You are provided the following information on the two stocks: | ||||
| State | Probability | Stock I | Stock II | |
| Recession | 15.00% | 5.00% | -21.00% | |
| Normal | 70.00% | 18.00% | 10.00% | |
| Boom | 15.00% | 7.00% | 39.00% | |
| Market risk premium | 7.00% | |||
| Risk-free rate | 3.50% |
1. Calculate the Expected Return, Standard Deviation, and Beta for each stock.
2. Which stock has more systematic risk and which one has more unsystematic risk? Which stock is "riskier"? Explain your answer completely.
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Personal Finance
Authors: Jeff Madura
5th edition
132994348, 978-0132994347
