Problem $11-33$ Systematic versus Unsystematic Risk

Consider the following information about Stocks I and II:

$\backslash$table$[[,\backslash$table$[[$Probability of$],[$State of$],[$Economy$]],\backslash$table$[[$Rate of Return if State$],[$Occurs$]]],[$State of Economy,Stock I,Stock II$,],[$Recession$,\mathrm{.}26,\mathrm{.}06,-\mathrm{.}21],[$Normal$,\mathrm{.}51,\mathrm{.}18,\mathrm{.}08],[$Irrational exuberance,$\mathrm{.}23,\mathrm{.}07,\mathrm{.}41]]$

The market risk premium is $5$ percent and the risk$-$free rate is $4$ percent. $($Do not round intermediate calculations. Enter the standard deviations as a percent and round all answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

$\backslash$table$[[$The standard deviation on Stock I$\text{'}$s expected return is$,$percent, and the$],[$Stock I beta is$,,.$ The standard deviation on Stock II's expected return is$],[,$percent, and the Stock II beta is$,.$ Therefore, based$],[$on the stock's systematic risk$/$beta$,$ Stock,,is "riskier".$]]$