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Consider the following information on Stocks I and II: State of Economy Recession Normal Irrational exuberance Rate of Return if State Occurs Probability of State

Consider the following information on Stocks I and II: State of Economy Recession Normal Irrational exuberance Rate of Return if State Occurs Probability of State of Economy Stock I Stock II . 30 .03 -.21 . 30 .37 .14 .31 .47 .40 The market risk premium is 8 percent and the risk-free rate is 4.5 percent. a-1. What is the beta of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete and correct. Beta 2.49 Stock Stock II 1.53 a-2. Which stock has the most systematic risk? Answer is complete and correct. Stock 1 Stock 11 b-1. What is the standard deviation of each stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Stock Standard Deviation % % Stock II b-2. Which one has the most unsystematic risk? Answer is complete and correct. Stock Stock 11 c. Which stock is "riskier"? Answer is complete and correct. Stock 1 Stock 11

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