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Consider the following information on Stock A and B: State of Probability of state Stock A Stock B Economy of Economy Rate of Return Rate
Consider the following information on Stock A and B: State of Probability of state Stock A Stock B Economy of Economy Rate of Return Rate of Return Recession .15 .14 -.18 Normal .60 .24 .10 Boom .25 .28 .40 The Market risk premium in 8 percent and the risk-free rate is 6 percent a. Compute the standard deviation for each of the two stocks b. compute the level of systematic risk associated with each stock based on the above, which stock is really more riskier? Explain
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