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Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of Economy Stock I State of Economy
Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of Economy Stock I State of Economy Recession Stock Il 20 .09 -26 Normal .60 18 13 Irrational exuberance 20 12 46 The market risk premium is 5 percent, and the risk-free rate is 4 percent. (Do not round intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 2 decimal places, e.g., 32.16.) The standard deviation on Stock I's return is percent, and the Stock I beta is deviation on Stock Il's return is percent, and the Stock Il beta is is "riskier". stock's systematic risk/beta, Stock The standard Therefore, based on the
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