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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 | .03 | -.19 |
Normal | .25 | .35 | .14 |
Irrational exuberance | .30 | .29 | .45 |
The market risk premium is 12 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? | ||||
|
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 | % |
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