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

State of Economy Probability Stock I Stock II

Recession .30 .04 -.15

Normal .25 .31 .14

Irrational exuberance .45 .25 .41

The market risk premium is 8 percent, and the risk-free rate is 6 percent.

1-a. What is the beta of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Beta- Stock I Stock II

1-b. Which stock has the most systematic risk? Stock I Stock II

2-a. What is the standard deviation of each stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Standard Deviation Stock I % Stock II %

2-b. Which one has the most unsystematic risk? Stock I or Stock II

3. Which stock is riskier?