If the risk-free asset gives one a 10% return, then what is Stock Ls risk premium, and what is Stock Us? (Hint: an assets risk premium is its expected return in excess of the risk-free assets return.) The situations are summarized below. Recession 80% Probability Boom 20% Probability Stock Ls return: in Recession -20% in Boom 70% Stock Us return: in Recession 30% in Boom 10%

2. Based on the information in Q 1, what is Stock Ls standard deviation, and what is Stock Us?