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Consider the following information about Stocks A and E: State of Probability of Rate of Return Rate of Return Economy State for Stock A for
Consider the following information about Stocks A and E: State of Probability of Rate of Return Rate of Return Economy State for Stock A for Stock B The riskfree rate is 3.5%, and the market risk premium is 7%. For all the following questions, please keep 4 decimal points. a) What are the expected returns of both stocks? [2pts) b] Which stock has the most systematic risk? (2pts) c} Which stock has the most total risk? (2pts) d) Which stock has the most unique risk? Interpret it intuitively, and no calculations are required. {2 pts) e) Which stock is 'risker' to an investor who holds the stocks as part of a diversied portfolio? Explain. (2 pts)
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