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d. Based on the following information in the table below: Rate of return if state occurs State of Probability of economy of economy Stock A

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d. Based on the following information in the table below: Rate of return if state occurs State of Probability of economy of economy Stock A Stock B Recession 0.15 0.09 -0.30 Normal 0.70 0.42 0.12 Boom 0.15 0.26 0.44 The market risk premium is 10 per cent, and the risk-free rate is 4 per cent. i. Compute the beta (BA) and standard deviation of stock A. ii. Compute the beta (BB) and standard deviation of stock B. iii. Which security is 'riskier'? Explain (11 marks)

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