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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?

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 %

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