9.

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	.21	.050	.26
Normal	.66	.350	.18
Irrational exuberance	.13	.210	.46

The market risk premium is 11.6 percent, and the risk-free rate is 4.6 percent.

Requirement 1:

(a)	Calculate the beta and standard deviation of Stock I.(Do not round intermediate calculations. Enter the standard deviation as a percentage. Round your answers to 2 decimal places (e.g., 32.16).)

	Stock I
Beta
Standard deviation	%

(b)	Calculate the beta and standard deviation of Stock II.(Do not round intermediate calculations. Enter the standard deviation as a percentage. Round your answers to 2 decimal places (e.g., 32.16).)

	Stock II
Beta
Standard deviation	%

Requirement 2:

(a)	Which stock has the most systematic risk?

(Click to select)Stock IStock II

(b)	Which one has the most unsystematic risk?

(Click to select)Stock IIStock I

(c)	Which stock is riskier?

(Click to select)Stock IIStock I