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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 | .22 | .045 | ?.37 |
| Normal | .62 | .355 | .29 |
| Irrational exuberance | .16 | .215 | .47 |
| The market risk premium is 11.7 percent, and the risk-free rate is 4.7 percent. |
| Requirement 1: |
| (a) | Calculate the beta and standard deviation of Stock I. |
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Financial Institutions Management
Authors: Anthony Saunders, Marcia Cornett
8th Edition
0078034809, 978-0078034800
