Problem 12-19

Consider the following information on Stocks I and II:

		Rate of Return If State Occurs
	Probability of
State of Economy	State of Economy	Stock I	Stock II
Recession	.45	.05	-.16
Normal	.40	.23	.14
Irrational exuberance	.15	.17	.33

The market risk premium is 12 percent, and the risk-free rate is 3 percent.

1-a.	What is the beta of each stock? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Beta
Stock I
Stock II

2-a.	What is the standard deviation of each stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

	Standard Deviation
Stock I	%
Stock II	%