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 .20 .010 .30 Normal .55 .320 .22 Irrational exuberance .25 .180 .40 The market risk premium is 11 percent, and the risk-free rate is 4 percent. a. Calculate the beta and standard deviation of Stock I. (Do not round intermediate calcu

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	.20	.010	.30
Normal	.55	.320	.22
Irrational exuberance	.25	.180	.40

The market risk premium is 11 percent, and the risk-free rate is 4 percent.
a.	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.)
b.	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.)
c.	Which stock has the most systematic risk?
d.	Which one has the most unsystematic risk?
e.	Which stock is riskier?

lations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.) b. 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.) c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is riskier?