Consider the following information on Stocks I and II: State of Economy Probability of State of Economy Rate of Return if State Occurs Stock I Stock II Recession .21 .050 .26 Normal .66 .350 .18 Irrational exuberance .13 .210 .46 The market risk premium is 11.6 percent, and the risk-free rate is 4.6 percent.

Requirement 1: (a) Calculate the beta and standard deviation of Stock I. (Do not round intermediate calculations. Enter the standard deviation as a percentage. Round your answers to 2 decimal places (e.g., 32.16).) Stock I Beta Standard deviation % (b) Calculate the beta and standard deviation of Stock II. (Do not round intermediate calculations. Enter the standard deviation as a percentage. Round your answers to 2 decimal places (e.g., 32.16).) Stock II Beta Standard deviation %

Requirement 2: (a) Which stock has the most systematic risk? (b) Which one has the most unsystematic risk? (c) Which stock is riskier?