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Consider the following information on Stocks I and II: Rate of Return if State Occurs State of Economy Recession Normal Irrational exuberance Probability of State

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Consider the following information on Stocks I and II: Rate of Return if State Occurs State of Economy Recession Normal Irrational exuberance Probability of State of Economy .35 .25 .40 Stock I .03 .33 .27 Stock IT -.17 . 14 .43 The market risk premium is 10 percent and the risk-free rate is 6 percent 8-1. What is the beta of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Beta Stock Stock 11 094 0.49 --2. Which stock has the most systematic risk? Stocki Stock il b-1. What is the standard deviation of each stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Stock Stock Standard Deviation % %

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