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7. Consider the following information about Stocks I and II: The market risk premium is 7 percent, and the risk-free rate is 3.5 percent. Which

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7. Consider the following information about Stocks I and II: The market risk premium is 7 percent, and the risk-free rate is 3.5 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Explain. (Hint: You need to calculate the expected returm of stock I and stock II and then use CAPM to get the beta of both stocks.)

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