(c) Suppose that market risk premium is 10% and risk-free rate is 2%. Compute market betas for stocks A and B.

(d) Which stock has more systematic risk? Total risk?

(e) Suppose that you have $1000 and you invest $400 in stock A and $600 in stock B. Compute mean, standard deviation, market beta of your portfolio.

State Probability RA RB 0.20 0.59 Boom Normal Recession Disaster 25% 15% 12% 10% 3% 1% -40% -10% 0.20 0.01