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Consider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of Economy @.45 State of Economy Recession
Consider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of Economy @.45 State of Economy Recession Normal Irrational exuberance Stock I 0.94 0.29 2.23 Stock II -0.22 0.14 0.39 0.30 0.25 The market risk premium is 12 percent and the risk-free rate is 4 percent. a-1. What is the beta of each stock? (Do not round intermediate calculations. Round you Beta 2 Stock 1 Stock N. a-2. Which stock has the most systematic risk? Stock 1 Stock II b-1. What is the standard deviation of each stock? (Do not round intermediate calculatio rounded to 2 decimal places.) Standard Deviation % Stock I Stock Il %
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