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*******PLEASE PROVIDE SOLUTION AND ANSWER (A-E)***** 1. a) Stock A has a beta of 1.2 and a standard deviation of 25% on its returns. Stock

*******PLEASE PROVIDE SOLUTION AND ANSWER (A-E)*****

1. a) Stock A has a beta of 1.2 and a standard deviation of 25% on its returns. Stock B has a beta of 1.5 and a standard deviation of 20% on its returns. Which stock has the higher systematic risk, and which one has the higher unsystematic risk?

a. A; A

b. A; B

c. B; A

d. B; B

e. B; insufficient information for comparison of unsystematic risks

1. b) Calculate the standard deviation of returns of Stock Q, given the following information.

State

Stock return

Probability of state

Recession

-2%

35%

Normal

8%

50%

Boom

20%

15%

Select one:

a. 7.70%

b. 6.30%

c. 5.37%

d. 7.33%

e. 3.66%

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