Question
Consider the following information on Stocks A and B: State of Economy Probability of Rate of Return if State Occurs State of Economy Stock A
- Consider the following information on Stocks A and B:
| State of Economy | Probability of | Rate of Return if State Occurs | |
|
| State of Economy | Stock A | Stock B |
| Recession | 0.60 | 5% | -10% |
| Boom | 0.40 | 20% | 30% |
The market risk premium is 6%, and the risk-free rate is 4%.
- Which stock has more systematic risk? Use the calculation to support your answer.
- Which stock has more total risk? Use the calculation to support your answer.
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Essentials Of Health Care Finance
Authors: William O. Cleverley, James O. Cleverley
8th Edition
1284094634, 978-1284094633
