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Consider the following information on Stocks I and II: Rate of Return If State Occurs Probability of State of Economy State of Economy Stock I

Consider the following information on Stocks I and II: Rate of Return If State Occurs Probability of State of Economy State of Economy Stock I Stock II Recession .45 .05 -.18 Normal .40 .23 .14 Irrational exuberance .15 .17 .23 The market risk premium is 12 percent, and the risk-free rate is 5 percent. 1(a) What is the beta of each stock? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Beta Stock I: Stock II:

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