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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

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 .24 .055 .39
Normal .64 .365 .31
Irrational exuberance .12 .225 .49

The market risk premium is 11.9 percent, and the risk-free rate is 4.9 percent.

Calculate the beta and standard deviation of Stock I.

Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.

Calculate the beta and standard deviation of Stock II.

Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.

Which stock has the most systematic risk?

Which one has the most unsystematic risk?

Which stock is riskier?

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