Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Consider the following information on Stocks I and II: State of Probability of Rate of Return if State Occurs Economy State of Economy Stock I
Consider the following information on Stocks I and II:
State of | Probability of | Rate of Return if State Occurs | |||||||||
Economy | State of Economy | Stock I | Stock II | ||||||||
Recession | .24 | .030 | .34 | ||||||||
Normal | .59 | .340 | .26 | ||||||||
Irrational exuberance | .17 | .200 | .44 | ||||||||
The market risk premium is 11.4 percent, and the risk-free rate is 4.4 percent. Calculate the beta and standard deviation of Stock I. (Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.)
Stock I | |||
Beta | |||
Standard deviation | % | ||
Calculate the beta and standard deviation of Stock II. (Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.)
Stock II | |||
Beta | |||
Standard deviation | % | ||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started