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Consider the following information about Stocks I and II: State of Economy Probability of State of Economy Stock I Stock II Recession .20 0.05 -0.22
Consider the following information about Stocks I and II:
State of Economy | Probability of State of Economy | Stock I | Stock II | |
Recession | .20 | 0.05 | -0.22 | |
Normal | .55 | 0.20 | 0.09 | |
| .25 | 0.08 | 0.42 |
The market risk premium is 8 percent, and the risk-free rate is 6 percent.
The standard deviation on Stock I's return is ??? percent, and the Stock I beta is ???. The standard deviation on Stock II's return is ??? percent, and the Stock II beta is ???. Therefore, based on the stock's systematic which stock is "riskier"
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